Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BRITISH RAILWAYS BILL

Order for Third Reading read.

[Queen's Consent, on behalf of the Crown, signified.]

Motion made, and Question proposed, That the Bill be now read the Third time.

Sir Bernard Braine: Before we agree to this motion may I ask you, Mr. Speaker, whether the promoters of the Bill are now prepared to give an unequivocal assurance that they will seek leave in another place to delete from the Bill a certain provision, namely the railway link to the oil refineries on Canvey Island?

Mr. George Cunningham: I have been asked to respond to that invitation on behalf of the British Railways Board. The Secretary of State for the Environment announced in September that he would be having a public inquiry about the possibility of revoking planning permisson for the United Refinery installa-

tion on Canvey Island. In the light of that decision and the urgent need for proceeding with this Bill, at long last, the British Railways Board has asked me to say that at Committee stage in the House of Lords it will seek to have the provision relating to the spur line on Canvey Island removed from the Bill. As the vicarious protagonist of the hon. Member for Essex, South-East (Sir B. Braine) throughout this matter, it would be curmudgeonly of me at this point not to pay tribute to his vigorous and prolonged efforts in this matter. It will be with strong but mixed feelings, and I am sure I speak on behalf of the whole House, that we shall contemplate the possibility of not hearing yet again the hon. Gentleman's speech on this subject.

Mr. Speaker: Order. We all have mixed feelings on that.

Question put and agreed to.

Bill accordingly read the Third time and passed.

THE GREEN, ABERDEEN (BOOTS THE CHEMISTS LIMITED) ORDER CONFIRMATION

Mr. William Ross presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to The Green, Aberdeen (Boots The Chemists Limited); and the same was read the First time; and ordered to be considered upon Wednesday next and to be printed. [Bill 10.]

Oral Answers to Questions — NATIONAL FINANCE

Stamp Duty (Charities)

Mr. Jessel: asked the Chancellor of the Exchequer what action he proposes to take to ensure that charities which paid stamp duty between 26th March and 31st July 1974 are in no worse position than those which are liable to stamp duty thereafter.

The Financial Secretary to the Treasury (Dr. John Gilbert): To amend the rate of duty retrospectively for this period would create administrative difficulties which I do not think could be justified.

Mr. Jessel: Will the Government take another look at this matter, despite the administrative difficulties, because it is an inequitable situation? Is he aware that bodies which have to pay stamp duty for May, June or July of this year have to pay twice as much as anyone before or since? Is he further aware that there is a charity in my constituency which has to pay an extra £450 because of this? Is not this contrary to the will of the House? It seems to be very wrong.

Dr. Gilbert: I understand the hon. Gentleman's point and I recognise his long and sincere interest in this subject. I think he is pitching it a little high, if he says that it is contrary to the will of the House, because the Government accepted the sense of the Committee amendment in this matter and the date which is now effective was accepted by
the House on Report.

Overseas Trade Deficit (Petroleum)

Mr. Douglas-Mann: asked the Chancellor of the Exchequer how long he estimates it will take, at current share prices, for the accumulated overseas trade deficit in respect of petroleum and petroleum products, at the current rate of deficit, to become equivalent to the value of a controlling—i.e. 51 per cent.—interest in the ordinary shares of all companies whose shares are quoted on the London Stock Exchange; and what the period would be

if fixed interest securities were included in the estimate.

The Paymaster-General (Mr. Edmund Dell): On 28th June 1974, 51 per cent. of the value of ordinary shares and deferred capital of United Kingdom registered companies quoted on the London Stock Exchange was equal to £14,150 million; and 51 per cent. of the value of preference shares and preferred and loan capital was equal to £2,140 million. The deficit on visible trade in petroleum and petroleum products in the three months to October averaged just under £300 million a month. My hon. Friend will be aware of the pitfalls in any such comparison.

Mr. Douglas-Mann: Would not my right hon. Friend not agree that the figures he has quoted are out of date and that current figures are even worse? If we take the September figures for the total value of equity shares, of £20,000 million, this means that at the present rate our oil deficit will be equivalent to a controlling interest in all United Kingdom British companies in just under three years. In the light of these figures, which have not emerged as clearly as they ought to have done from my right hon. Friend's reply, would he not agree that far more drastic measures for energy conservation are required than those contained in the Budget?

Mr. Dell: As has been announced, my right hon. Friend the Secretary of State for Energy will be making a statement about energy conservation later this month. Meanwhile my hon. Friend will be aware that there are controls on direct inward investment and in certain circumstances on inward portfolio investment. Therefore the comparison which he makes exaggerates the dangers, especially taking account of the fact that so far the volume of direct inward investment by the oil producers has been small.

Mr. Robert Carr: Would not the right hon. Gentleman agree that, looked at from the other end of the telescope, this underlines the importance of the Government taking action which might reactivate the capital market in this country?

Mr. Dell: My right hon. Friend took such action on Tuesday.

Investment Finance

Mr. Skinner: asked the Chancellor of the Exchequer whether he has any plans to set up an investment bank.

Mr. Cryer: asked the Chancellor of the Exchequer whether he intends to introduce legislation to enable an investment bank to be established.

Mr. Russell Kerr: asked the Chancellor of the Exchequer whether he has any plans to set up an investment bank.

Mr. Norman Lamont: asked the Chancellor of the Exchequer whether the Government have any plans for the creation of an investment bank.

Mr. Moate: asked the Chancellor of the Exchequer whether he has any plans to set up an investment bank.

The Chancellor of the Exchequer (Mr. Denis Healey): Not at present. I believe that any immediate need for a new source of investment finance for industry will he met by the plans for a major expansion of Finance for Industry, which I mentioned in my Budget speech on 12th November. The National Enterprise Board will have its rôle at a later stage.

Mr. Skinner: Does my right hon. Friend agree that the Finance for Industry scheme is akin to the previously proposed investment bank and that it was conceived out of a strike of capital? Will he bear in mind that, on the day he announced that nationalised industries were to be told to deprive themselves of their social responsibilities, private industries were being bailed out in this fashion to fuel the Aims of Industry and the Tory Party, because there is no planning agreement on unemployment? Will my right hon. Friend guarantee that no category 1 firms will be assisted by the Finance for Industry bank?

Mr. Healey: My hon. Friend totally misunderstands the nature of Finance for Industry. Finance for Industry is the new name for two bodies which were set up in 1945 to operate entirely within the private banking system. Considering the criticism which my hon. Friend and many others have levelled at insurance companies and pension funds for not giving

sufficient investment to productive industry in the past, I had hoped that he would welcome the fact that an instrument has been found for directing funds to productive investment in industry in the future.

Mr. Lamont: Is it not true that no banking system in the world—not even in Japan—provides long-term capital on a substantial basis? As the Prime Minister in his speech to the TUC said that he wanted to see a buoyant stock market financing industry, would it not be much simpler and less tortuous for the Government to repeal some of the anti-investment measures they have taken and, for example, further relax dividend control?

Mr. Healey: No, Sir. The hon. Gentleman should be aware that in the past British banks have played a far smaller rôle in providing investment finance for industry than have banks in countries which compete successfully with us like Germany and Japan. He should welcome the fact that banks have been used much more in the last few years as a source of investment finance. In reply to the latter part of the supplementary question, the hon. Gentleman should be aware of the remarks of Mr. George Loveday yesterday about the important rôle the Budget will play in reactivating the capital market in Britain.

Mr. Cryer: Will my right hon. Friend confirm that the Finance for Industry investment programme will increase, as a result of his Budget, from £50 million a year approximately to £500 million a year? Does he accept that this will effectively castrate the National Enterprise Board and that it represents a significant victory for the City? Does my right hon. Friend also accept that FFI finance should go to small and medium-sized firms and not to category 1 firms?

Mr. Healey: No, Sir. With respect I am surprised at my hon. Friend, because he and many who share his general views have argued for some years that the banks should contrive to direct more of their resources towards investment in productive industry. That is precisely what is envisaged under Finance for Industry, which is a private organisation for which the Government provide no support. As to Government finance for industry, the Government propose, as I made clear in my Budget speech, to make use of the


National Enterprise Board to provide help for industry in return for a suitable share of the equity, if that seems appropriate, and on other conditions which have been laid down in the White Paper "Regeneration of Industry".
If, as I know he does, my hon. Friend puts full employment first, he must recognise that there is no means of avoiding a large increase in unemployment in the immediate future unless steps are taken in the immediate future to improve finance for industry, and there is no chance whatever of the National Enterprise Board fulfilling that rôle in the time scale required.

Mr. Moate: Has the Chancellor seen the forecast that the new funds will have to be lent at a rate of 15½ to 16 per cent.? Does he agree that that sort of rate will have to be charged? If so, is it not clear that, with such low returns on capital, industry at present could not possibly use those funds to any great extent? Would not confidence have been restored more promptly by reducing the level of corporation tax and allowing more appropriate prices to be charged through the price control mechanism?

Mr. Healey: The hon. Gentleman will be aware that the measures I announced in my Budget speech will increase the return on capital available to industry and that those measures have been widely welcomed inside industry. I believe that there will be a widespread demand for the funds made available through Finance for Industry. These funds will be borrowed on very fine terms and on-lent on fine terms. The terms will be commercial terms, and I have no doubt that industry will take advantage of them.

Miss Margaret Jackson: Will the Chancellor tell the House why he believes that the money being made available through Finance for Industry will help the unemployment problem this winter or next more effectively than would such help channelled, for example, through the provisions of the Industry Act 1972? Will my right hon. Friend also say why he feels that making these funds available will surely promote investment and job expansion in ways which similar measures in 1973, 1972, 1971 and back into history did not?

Mr. Healey: My hon. Friend is mixing up several separate matters. I made clear in my Budget speech that I am prepared to expand the funds available under the Industry Act for helping industry in the immediate future. I said that on Tuesday, and I regret that my hon. Friend does not seem to recall my announcement. Assistance under FFI will be made available to industry for productive investment, which I am sure my hon. Friend welcomes because I know her views on that matter.
The question how industry in general will make use of the improved financial conditions provided by the Budget is something which I shall watch as carefully as will my hon. Friend, but she will be aware that in every respect the concessions made both under the Price Code and under the new system of dealing with stock appreciation are carefully calculated to help industry in ways which are most likely to encourage productive investment.

Mr. Pardoe: Is the right hon. Gentleman aware that in his discussions with the managers of public service pension funds about these finances the Governor of the Bank of England and his staff threatened that the Government might remove some of the tax advantages from the pension funds unless they lent money through FFI? Is the right hon. Gentleman aware that those threats were being made, and has he authorised them?

Mr. Healey: I am not aware of those threats, and I am not prepared to accept that they were made without investigating the matter, but I will certainly do that.

Disposable Income

Mr. Tebbit: asked the Chancellor of the Exchequer if he will publish a table showing the changes in net real disposable income per head at constant prices over the previous 10 years to the most recent convenient date.

Mr. Dell: With permission, I will circulate these figures in the OFFICIAL REPORT.

Mr. Tebbit: Is the right hon. Gentleman aware that his reply is disappointing? I should have liked the figures now because they would show an interesting correlation between the politics of the


Governments concerned and the prosperity of the nation. More to the point, will the right hon. Gentleman say what will happen next year?

Mr. Dell: If the hon. Gentleman had asked for a number of years fewer than 10 it might have been possible to read out the figures in the House, particularly if those figures were included in fewer than four columns. Given the circumstances, I thought that what I have done would be for the convenience of the House.
The hon. Gentleman will find that in 1972 and 1973, at the time when we were running up the largest balance of payments deficit in our history, the expansion of personal disposable income was higher than it was in the previous year. He will be aware that that is an unsatisfactory measure of real increase in income, as he will find if he compares it with the increase in real income of the ordinary worker which was substantially less, because the personal disposable income figures include unearned income which most workers do not enjoy.

Mr. Tebbit: What about next year?

Following are the figures:


PERSONAL DISPOSABLE INCOME (BEFORE PROVIDING FOR ADDITIONS TO TAX RESERVES) AT 1970 PRICES, PER HEAD OF POPULATION



Total
Increase on previous year



£
£
Per cent.


1964
569
17
3·1


1965
579
10
1·8


1966
589
10
1·7


1967
594
5
0·8


1968
601
7
1·2


1969
602
1
0·2


1970
621
19
3·2


1971
636
15
2·4


1972
677
41
6·4


1973
713
36
5·3

Budget Proposals

Mr. Duffy: asked the Chancellor of the Exchequer if he is satisfied with the reception accorded by industry to his Budget proposals on the 12th November.

Mr. Healey: My Budget measures aim at a fundamental reconstruction of the economy in circumstances of the gravest difficulty. I did not expect that everyone would be completely satisfied with the balance which has been struck. The TUC reaction has been encouraging and its support is most welcome. The CBI's reaction has been more grudging. But I

believe that on closer inspection the CBI will realise that my measures give industry the opportunity for achieving a fair return on capital providing it shows the necessary vigour and alertness.

Mr. Duffy: Is my right hon. Friend aware that on balance his Budget has been well received in many other quarters than the TUC and CBI, and that The Times and the Financial Times in their leader titles yesterday described it as a step in the right direction? Nevertheless will he confirm that the doubts expressed since publication yesterday evening of the trade figures—especially in this morning's Guardian—about his growth target and the fact that it can be export-led are ill-founded?

Mr. Healey: Yes, certainly. I read with interest the article in this morning's Guardian, but it failed to point out that the estimates published in the Red Book which accompanied my Budget Statement on Tuesday recognised that there will be a fall in the volume growth of exports in the coming months from the present growth of 5 per cent., which is lower than the growth in the first half of this year, to 4½ per cent. growth. However, this will still be in line with the expected growth in world trade at the lower level which I predicted in my speech on Tuesday.

Mr. Peter Rees: What significance does the right hon. Gentleman attach to the fact that as a consequence of his Budget the pound has gone down and Krugerrands have gone up?

Mr. Healey: I would attach the same importance to Krugerrands as I always attach to what happens in this area. So far as what has happened to the pound is concerned, the hon. and learned Gentleman will be aware that there was a certain flurry over the pound through a misunderstanding in the first few hours after I announced that we did not propose to continue the guarantee on sterling balances. The hon. and learned Gentleman will be glad to note, as I was, that the pound was completely steady yesterday.

Mr. Canavan: Has my right hon. Friend received any representations from workers or board members in the nationalised industries protesting against the proposed phasing out of subsidies in


those industries? Docs he not realise that particularly in the case of nationalised fuel industries it would be fairer to compel industrial consumers to pay for fuel at cost price while retaining the benefit of subsidies for domestic consumers, thus helping to protect working people and their families from the effects of inflation, in the same way as with agricultural and food subsidies?

Mr. Healey: What has struck me with regard to my proposals to phase out price subsidies in the nationalised industries—I remind my hon. Friend that I did not talk about phasing out social subsidies which exist, I think, with the agreement of all parts of the House on, for example, the railways—is that they were welcomed by both trade unions and management in all nationalised industries. Indeed, I note that in yesterday's debate one of my hon. Friends who was deeply concerned in his union capacity with one of the nationalised industries greatly welcomed the step which I propose to take.

Investment

Mr. Carter: asked the Chancellor of the Exchequer if he is satisfied with the present level of investment as a percentage of the gross national product.

Mr. Dell: No, Sir. In 1973 the proportion of the national product devoted to investment in total was 22·3 per cent., of which manufacturing industry accounted for just 4 per cent. and housing 4·3 per cent. These figures remain inadequate. We need more investment, and we need to ensure that funds are invested where they will be most effectively used in the national interest.

Mr. Carter: Is not the prime responsibility for this pathetic level of investment that of private industry? If we fail by either public or private means to increase the level of investment, can my right hon. Friend say precisely how he sees our future?

Mr. Dell: We must increase the level of investment. I think that the responsibility is divided between private industry and successive Governments which followed stop-go policies. I think that the level of investment in manufacturing industry is likely to increase if we manage to have a steady course of development, even if it is slower than

some of the exaggerated demands of right hon. Gentlemen opposite.

Mr. Ian Lloyd: Does the right hon. Gentleman accept that if the level of investment rises the final reward to the investor must reach him? How long will the Government postpone that?

Mr. Dell: During an inflationary situation, as the previous Government found, it is necessary to exercise various controls, but they have to be exercised fairly. We do not believe that anything we are doing in that respect should discourage further investment in industry.

Oil Prices (EEC Loan)

Mr. Blaker: asked the Chancellor of of the Exchequer if he will make a statement about the recent agreement by the Finance Ministers of the EEC for the raising of a loan of $3,000 million to assist member countries in dealing with the problems resulting from the increased price of oil.

Mr. Healey: The scheme under consideration is that the Community should borrow funds in its own name from external sources and relend them to member States in balance of payments difficulties arising from the oil price increases.
Draft regulations setting out the framework of a scheme, together with an explanatory memorandum, have been deposited in the House. Specific Council decisions will be required at a later stage before any transactions are approved.
The scheme is of potential value to member countries in financing their balance of payments deficits and would play a part in meeting the immense problem of recycling oil surplus funds.

Mr. Blaker: Is it not clear that this will be a welcome addition to the means available to the Community to help its members? Will the Chancellor say whether it is intended, once this initial slice of $3,000 million has been arranged, to follow it up with further loans on similar lines? Can he confirm that if by some mischance we leave the Community we would be unable to take advantage of the arrangement?

Mr. Healey: On the hon. Gentleman's last point, my support for this facility has been in no way influenced by any idea


that I expect Britain to require to make use of it, at any rate in the foreseeable future. But I welcome the hon. Gentleman's view that the arrangement is an important, though modest, addition to the facilities available for recycling oil funds.
With regard to further sums being borrowed and on-lent at a later stage, I would hope that that would be possible, but some members of the Community were anxious to limit the initial sum to what I regard as a comparatively small amount.

National Savings Stamp

Dr. Edmund Marshall: asked the Chancellor of the Exchequer why the 10p national savings stamp has been withdrawn.

Mr. Dell: The supply of national savings stamps to post offices was interrupted by industrial action but should be resumed throughout the country by early December. As to the future of the national savings stamp, I would refer my hon. Friend to the answer I gave on 6th November to the hon. Member for Faversham (Mr. Moate).

Dr. Marshall: I acknowledge what my right hon. Friend says, but does he not agree that in the past the savings stamp has played a valuable part in encouraging the savings habit among schoolchildren? Is he satisfied that withdrawal of the stamp will do no harm in this respect?

Mr. Dell: Yes. I think that the sensible action now to take is to encourage schoolchildren to use banking schemes rather than the stamp. This is increasingly happening in schools as a result of the activities of the national savings movement, and this is a development which obviously should be encouraged. The two-year phasing-out period which the Government suggest should give full opportunity to allow that to happen.

Miss Fookes: Is the right hon. Gentleman aware that not only schoolchildren but the elderly feel very strongly that the stamp should be continued because it is of great use to them?

Mr. Dell: I know that there is a considerable amount of social work which centres on the stamp, but I believe that there are many other ways in which this work can be done. This is a matter

which we propose to discuss with the national savings movement. I am sure that ways can be found for this social work to be kept going.

Inflation

Mr. Ridley: asked the Chancellor of the Exchequer what estimate he has made of the current annual rate of inflation.

Mr. Adley: asked the Chancellor of the Exchequer what steps he intends to take to ensure that the rate of inflation remains at 8·4 per cent.

Mr. Healey: The increase in the retail price index in the 12 months to September was 17·1 per cent. The increase over the three months to September grossed up to an annual rate was just over 8·7 per cent., 0·3 per cent. more than in the three months to August. I told the House on Tuesday what measures I propose to safeguard investment and employment and to strengthen the social contract.

Mr. Ridley: I am sure that we can all forgive the Chancellor for a little bit of statistical inexactitude in the heat of the General Election, but would he not agree that if the rate of inflation has dropped, which I think it has, during a period of ever-rising oil prices and even greater wage rises, this is due to the drastic reduction in money supply at the beginning of this year?

Mr. Healey: I am sorry that the hon. Gentleman spoiled a good point by suggesting that the figures I quoted were inexact. The figure I quoted of 8·4 per cent. in the three months up to and including August was absolutely exact and nobody has ever contested it. The Price Commission published its own index the other day, after the election, and the index, which does not cover rents, which the present Government froze, showed a rate of increase from December to February of 23 per cent., from March to May of 16 per cent. and from June to August of 9½ per cent.
I know that the hon. Gentleman would not want to suggest that these figures were inexact or that Sir Arthur Cockfield who at one time in his career was, I believe, tax adviser to the Conservative Party, was moved in publishing the figures


by any particular electoral service that he thought he was rendering to the Labour Party.

Mr. Adley: No matter how much the Chancellor of the Exchequer may now regret his remarks, is he aware that if his 8·4 per cent. election prospectus had been offered by a public company his right hon. and hon. Friends, especially those below the Gangway, would have demanded that the matter be referred to the Director of Public Prosecutions? If he has not already done so, will he read Bernard Levin in The Times today?

Mr. Healey: On the first matter, I recognise that the hon. Gentleman attempted to cover his chagrin at his inability to challenge the accuracy of my statement by an extraordinary and painfully worked out joke. I am not normally prepared to reveal my reading habits, but I follow Mr. Levin's articles from time to time, and I was delighted to discover the other day that his real trouble, according to him, is that he suffers from the death watch beetle.

Mr. Skinner: What is all the fuss and bother about this 8·4 per cent. which was bandied about during the election? The only figure that I recall is the 9½ per cent. proposed by the woman in the twinset and pearls.

Mr. Healey: I also remember that, and I have no doubt that we shall be hearing more about it later and how it is reconciled with the Draconian demands from the Opposition Front Bench for cuts in public expenditure.

Mr. Carr: May I concentrate the right hon. Gentleman's mind on the second part of the supplementary question put to him by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)? What steps is the right hon. Gentleman taking to maintain the rate of inflation at 8·4 per cent., and does he think that he will succeed?

Mr. Healey: I apologise. I did not reply to the earlier part of the supplementary question put to me by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). The hon. Gentleman asked me whether I thought that one contribution to this decline in the rate of inflation was the stricter control over the money

supply operated by the present Government. I am sure that this is the case. The previous Government, of which the hon. Gentleman was at one time a member, though he rightly resigned before 1973, allowed the increase in the money supply to rise at well over twice the level of this year. This was a major reason for the inflation that the present Government inherited at the end of February of this year.

Mr. Crawford: Does the Chancellor of the Exchequer agree that part of the reason for the unacceptable rate of inflation is the unacceptable cost to all the countries of this island of London, with its centralisation, congestion and associated weighting allowances on salaries?

Mr. Healey: No, Sir.

Mr. Ridley: On a point of order, Mr. Speaker. In view of the extraordinary number of mistakes and technological inexactitudes in the right hon. Gentleman's replies, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible opportunity.

Tax System (Indexation)

Mr. MeCrindle: asked the Chancellor of the Exchequer what studies are being undertaken at the Treasury with a view to indexing the tax system.

Mr. Dell: The effects of inflation on the tax system are kept under continuing review by the Treasury and Revenue Departments.

Mr. McCrindle: Would not the indexing of the tax system, by preventing all Governments benefiting from fiscal drag, make inflation less attractive to Governments than it has been for a number of years past? Will the right hon. Gentleman start some sort of investigation in the Treasury to see whether this is not a line that the Government might take in the near future?

Mr. Dell: I do not think that fiscal drag is sufficient to make inflation attractive to the Government. This matter is kept under review. We have at least annual Budgets, and now more frequently, in which it can be reviewed. The question is whether it should be done automatically by indexing or, as it is at the moment, by regular review. So far, we


have decided to stay with the latter method.

Sir John Hall: What studies are taking place into the possibility of introducing indexing right across the board, for incomes, social security benefits, tax scales and so on, as I suggested yesterday?

Mr. Dell: If it is done across the board, indexing has many implications—for example, for our foreign indebtedness. But one action that this Government have taken on the Page Report which the previous Government did not take is to define an area of small savers who could be assisted to protect their savings by indexation, and this scheme will be introduced next year.

Mr. Beith: asked the Chancellor of the Exchequer whether he will bring forward proposals for indexation or other regular review of tax thresholds so as to remove the disincentive effect on working widows and others which arises when their tax liability is increased by cost-of-living pension increases.

Mr. Dell: The level of tax thresholds and allowances is already kept under regular review.

Mr. Beith: Will the right hon. Gentleman accept that the steps taken by the Chancellor to ease the position of elderly people above the tax threshold will be warmly welcomed, but will he accept, too, that there is deep resentment among widows who feel that what is given with one hand by way of pensions is taken away by the other in the form of tax? Will the right hon. Gentleman ensure that this review leads to some benefit for their allowances?

Mr. Dell: My hon. Friend the Financial Secretary said a moment ago that this matter is kept under review. The hon. Gentleman will know that the national insurance widows' pension is paid in full without deduction of tax, and that any tax due is normally collected under PAYE. It therefore appears that a heavier burden of tax is cancelling the benefit, but that is not the case, as the hon. Gentleman will realise.

Mr. Cormack: Does the right hon. Gentleman realise that many hon. Members on both sides of the House are fed up with being given that sort of answer?

We represent many millions of widows. They do not want to be kept under review. They want action. Will the right hon. Gentleman ensure that action is taken very soon?

Mr. Dell: As my hon. Friend said, the best action is on the widows' pension and in reviewing tax allowances. That action is taken.

Petrol Consumption

Mr. Ashton: asked the Chancellor of the Exchequer if he will make a statement on his policy regarding fiscal methods designed to reduce the consumption of petrol.

Dr. Gilbert: I would refer my hon. Friend to my right hon. Friend's Budget Statement.

Mr. Ashton: Does not my hon. Friend agree that it is now an anachronism that the £25 road fund licence fee should be applicable to all vehicles? Would it not be better to abolish it altogether and put a little more on petrol so as to help workers in rural areas, where there are no bus services, to afford to be able to drive their cars to their places of work?

Dr. Gilbert: That point will be studied carefully. The consequences of removing the VED licence would be reflected in higher petrol charges, which would also affect people in rural areas.

Mr. Costain: In the Chancellor's deliberations, did he give any thought to the effect that the increased rate of VAT on petrol would have on the disabled, who have to use private transport to get to work? To offset this, what relief does he propose to give to disabled drivers?

Dr. Gilbert: All these considerations were borne in mind by my right hon. Friend. Any assistance to disabled drivers is the direct responsibility of my right hon. Friend the Secretary of State for Social Services.

Theatres

Mrs. Renée Short: asked the Chancellor of the Exchequer if he will reduce taxation on the theatre industry.

Dr. Gilbert: My right hon. Friend has received representations for relief and his decision will be announced in due course.

Mrs. Short: Will my hon. Friend bear in mind the fact that theatre managements have about reached the point of no return in terms of increasing seat prices? Is he aware that rising costs arc closing theatres and creating a great deal of unemployment? Will he consider the zero rating of the performing arts and the removal of VAT?

Dr. Gilbert: My hon. Friend's concern in these matters is well known. Part of the difficulty is that, unless we managed to get round the definition problems, any relief from VAT would produce uncovenanted benefits for the commercial theatre and nudie shows of the kind one sees in Soho—[Laughter.] I am not sure, Mr. Speaker, whether I was involving you or myself in that—rather than giving the assistance where it is most needed, to the type of theatre aided by Arts Council grants.

Mr. David Howell: Aside from the theatre-going habits of the Financial Secretary, what is the EEC view about VAT exemption on the live arts and on the theatre? I believe that a regulation is being considered or that a proposal is being put forward by the EEC Parliament.

Dr. Gilbert: The hon. Member is almost correct. In the context of VAT harmonisation, the EEC Commission has made proposals for exempting individual performers from VAT. But I am informed that in practice the proposal will not assist the commercial theatre.

Mr. Strauss: Will my hon. Friend bear in mind, when he speaks in terms of helping theatrical enterprises aided by the Arts Council, that the commercial theatre plays a very important part in the drama world and that it is just as important to remember its serious difficulties at the moment as it is those of enterprises supported by the Arts Council?

Dr. Gilbert: I take my right hon. Friend's point. He will appreciate that one of the difficulties of relieving discretionary expenditure of VAT is that it is not easy to know where to draw the line, because relief can be extended indefinitely into sport, entertainment and all sorts of leisure activities.

Working Widows (Tax)

Mr. Farr: asked the Chancellor of the Exchequer if he will take steps to relieve working widows from income tax.

Dr. Gilbert: I share the concern that lies behind the hon. Gentleman's Question, but I do not think a special tax relief to working widows is the best way to proceed. The better alternative is to increase their pensions, as we propose to do again next April.

Mr. Farr: Is the hon. Gentleman aware that there is an almost unanswerable case for relieving widows from the payment of income tax? Will he assure the House that the aim of the Government will be to bring about that position eventually?

Dr. Gilbert: No, Sir. I must tell the hon. Gentleman that we prefer to proceed by uprating the tax threshold and by increasing widows' pensions. To advance in the way suggested by the hon. Gentleman would give no benefit to widows who are not paying income tax.

Mr. Hooley: Does my hon. Friend agree that another method would be to restore what existed for many years, namely, a reduced rate of income tax at the lower level of the chargeable bracket? It is the destruction of that that has done so much damage to people on low incomes, including working widows.

Dr. Gilbert: I take my hon. Friend's point, and I can say that the whole structure of allowances and of the tax system is under constant review by my right hon. Friend.

Mrs. Chalker: Will the hon. Gentleman give an undertaking that the Government will consider the special tax burdens suffered by widows under 40 who are not in receipt of pension and who suffer most grievously under present injustices?

Dr. Gilbert: I take note of the point made by the hon. Lady. I do not think I should leave the subject without pointing out that under the capital transfer tax system to be put before the House my right hon. Friend is proposing considerable reliefs for widows, for the first time in history, estates passing to a widow will be relieved totally from tax, and this will be a great relief for them.

Interest Rates

Mr. Hooley: asked the Chancellor of the Exchequer what international discussions, to which the United Kingdom Government are a party, are in progress


designed to reduce the general level of interest rates.

Mr. Dell: There are no formal and specific discussions currently in progress, but the subject is discussed frequently in a wide range of bilateral and multilateral international meetings. In recent weeks there has, in fact, been some general reduction in international interest rates.

Mr. Hooley: That reduction is welcome, but if it is impossible to make progress on international agreements in this field will my right hon. Friend examine the possibility of having two-tier interest rates internally so that we can have preferential rates of interest for social and industrial investment?

Mr. Dell: This matter has been discussed with my hon. Friend before. It would be difficult to insulate by effective barriers the two tiers which my hon. Friend recommends. I am sure he will welcome the success of the Government in producing some reduction in interest rates over the past few months.

Mr. Norman Lamont: Does the Paymaster-General recall the statement of the Chancellor of the Exchequer in his March Budget that the most important thing for reducing domestic interest rates was to reduce the domestic borrowing requirement? Does the right hon. Gentleman think that an increase in the borrowing requirement will help to reduce interest rates?

Mr. Dell: The hon. Gentleman should go by the record. We have reduced interest rates, just as we have been successful so far in keeping the money supply under better control than the previous Government did.

Mr. Burden: What is the current borrowing rate for overseas borrowing by the present Government?

Mr. Dell: I think I had better ask for notice of that question. Some borrowings by nationalised industries are confidential, but if the hon. Gentleman puts down a specific Question about what he specifically wants to know I shall see what we can do to answer it.

Mr. Cant: I appreciate that the increase in the borrowing requirement has, unfortunately, forced up yields in the gilt-

edged market, but does not my right hon. Friend think that we are being a little too cautious when interest rates are declining in Europe and the United States'? Does he not have sufficient confidence in the banking system of this country to offer the sort of attraction that is required to the Arabs in relation to their oil money? Does he not think that he could reduce interest rates in this country and still keep Arab oil money here?

Mr. Dell: The relationship between domestic interest rates and Eurodollar interest rates has changed over the past few years, and there is now a differential in favour of sterling. This is a matter that we watch, but we have to bear in mind the relationship between domestic and international rates.

Oral Answers to Questions — SOCIAL CONTRACT

Mr. Tebbit: asked the Prime Minister which of his Ministers is responsible for the fulfilment of the social contract.

Mr. Rost: asked the Prime Minister which of Her Majesty's Ministers is responsible for the application of the social contract.

The Prime Minister (Mr. Harold Wilson): All members of the Government carry this responsibility, but it is not the responsibility of Government alone.

Mr. Tebbit: Will the Prime Minister give special responsibility for this to the Attorney-General so that he can explain in the House what part of any social contract requires that those who have been guilty of offences under the law should subsequently be excused of them for political partisan reasons, as at Clay Cross?

The Prime Minister: There is no reference in the social contract to Clay Cross or any other urban district authority, but I take the hon. Gentleman's supplementary question as being one characteristically related to party political reasons on his part.

Mr. Stonehouse: All hon. Members, and particularly those on this side of the House, wish the social contract to succeed, but does my right hon. Friend agree with the Chancellor of the Exchequer


that the alternative of widespread unemployment is unacceptable? Is it not the case that many official demands—apart from the unofficial ones—go well beyond that contract, and may I ask what contingency planning is being undertaken in case the TUC is unable to restrain those demands?

The Prime Minister: My right hon. Friend will be aware that what is important ultimately is the settlement and not the original negotiating demand. My right hon. Friend will also be aware, and will have read in the Press today, I think, that the TUC is addressing itself to this matter in respect of certain individual applications.

Mr. Rost: How will the social contract protect law-abiding ratepayers in Derbyshire who are to be surcharged to pay the Clay Cross debts?

The Prime Minister: This matter has been the subject of a statement in the House. It does not arise out of the social contract, and it was not referred to in the social contract. If, however, right hon. and hon. Gentlemen opposite wish to debate this matter, they will have the opportunity to do so either on a Supply Day or, of course, on the legislation.

Mr. Sedgemore: Can my right hon. Friend confirm that it is still part of the social contract to maintain full employment? Can he say at what level unemployment ceases to be full employment? Does he think that his views on the matter are compatible with the Chancellor's Budget Statement?

The Prime Minister: My right hon. Friend dealt with these matters in his Budget Statement two days ago. All these questions are currently being debated in the House. They were debated on the social contract and related matters on two days last week and on Tuesday and Wednesday of this week and they will be debated again later today. That is the appropriate place to go into these matters.

Mr. Thorpe: As we were led to believe during the election campaign that the social contract was a purely voluntary agreement, and as, yesterday, the Prime Minister's right hon. Friend the Secretary of State for Prices and Consumer Protection indicated that the Government

were considering using employers to prevent excessive wage or price increases by the infliction of a penalty, may we know when the Government will announce the statutory powers that they will require to give effect to this voluntary agreement?

The Prime Minister: Of course I read what my right hon. Friend said, which was in fulfilment of something that I had said in Cardiff during the election. I was asked about "rogue employers", a phrase I had used—and there are one or two around—[An HON. MEMBER: "The BBC."] The hon. Member has got that one right, at least. When I was asked about this, I said that if they were in a competitive export market they would not be able to afford to pay excessive costs and that on the home market they would be subject, as all manufacturers are, to strict price control. That is what my right hon. Friend amplified yesterday.

Mr. Swain: Reverting to the question of the hon. Member for Derbyshire, South-East (Mr. Rost), is my right hon. Friend aware that the late Sir Gerald Nabarro, in one of the few true things he said, said—this is referring to the social contract and justice—that people with money could buy justice? Because the councillors of Clay Cross have no money, they cannot even get justice at any price.

The Prime Minister: While I and many of my hon. Friends did not agree on many issues with Sir Gerald Nabarro, he was nevertheless a popular Member of the House on both sides. But I do not think that any remarks of Sir Gerald Nabarro or any questions that have been put about Clay Cross have any bearing on the main Question that I have been asked this afternoon. Hon. Members opposite seem determined to shake off all responsibility for the grave social harm that they did by the Housing Finance Act.

Mr. Heath: In relation to the Prime Minister's reply just now, we always come back to the fact that the social contract was arranged between the Labour Party and the trade unions, and now between the Labour Government and the trade unions. Since the employers or retailers or any other groups in the economy have not been involved in the social contract, how can the Prime Minister or any of his colleagues hold them


responsible for actions which they take which are supposed to be in compliance with an agreement made only between the Prime Minister and the unions?

The Prime Minister: I cannot think of anything in the social contract which has not been fully discussed with the CBI and, of course, at "Neddy". But I am interested to see the right hon. Gentleman getting up on this, because during the election he said that he wanted a social contract as well, and at no point, despite repeated chances in the election, did he ever give a scintilla of what would be contained in the social contract—only suggestions for talking with non-party people about what might be in it. However, should he catch his chairman's eye this afternoon, perhaps he will answer this question.

Mr. Heath: When the right hon. Gentleman says that this matter has been discussed with the CBI, is he implying that the employers have ever accepted the nationalisation part of the social contract or the planning agreements or the National Enterprise Board? They have not accepted any of them or fresh arrangements about picketing.

The Prime Minister: No, indeed they have not, and it would be unfair to ask them to do so. Equally the right hon. Gentleman cannot invoke them to impose a veto on the actions of Government, but—[Interruption.] This House is quite political; we have our policies and right hon. Gentlemen opposite have something of a policy too. This is a policy on which we were elected in two elections this year and I do not intend to apologise for it. But when the right hon. Gentleman refers to the CBI he always fails to mention that, at the meeting of "Neddy" the Wednesday after the issue of the document by the TUC, the President of the CBI asked leave of the chairman to go ahead of the agenda in order to congratulate the TUC on the social contract proposals which it had put before the nation.

Oral Answers to Questions — REDISTRIBUTION OF INCOMES AND WEALTH

Mr. Blaker: asked the Prime Minister when he expects to receive the first report of the Royal Commission on redistribution of incomes and wealth.

The Prime Minister: I am hopeful that the commission will meet the request, which was made in the Government's first reference to it, for an initial report within about a year.

Mr. Blaker: Can the Prime Minister explain why his right hon. Friend the Secretary of State for Employment seems so reluctant to invite the commission to study what happens in other countries? Is the Prime Minister aware, to take one example, that a Russian general receives more than 300 times as much in pay as a Russian private, whereas a British general, after tax, receives about five times as much as a British private? While I am not by any means suggesting that we should follow the Russian differentials, would it not be useful if the commission were to study what happens in other countries?

The Prime Minister: I am grateful to the hon. Gentleman. My own studies of these matters over many years in relation to soldiers led me to say many times, publicly and privately, that we did not expect to see the same inequalities of rewards in this country as they have in the Soviet Union. I did not know that the figures were quite so glaring as the hon. Gentleman says. The Royal Commission, of course, is not being precluded from making international studies. It will make international comparisons where these are relevant. But it cannot be directed to go into a long programme of research and parallel studies of the position of other countries—all other countries, not just the favourite one of the hon. Member. That would take too long and would place too much strain on the commission's resources. It has a job to do, and if it wants to know about the parallel questions abroad it will inquire into them.

Mr. Grimond: Would the right hon. Gentleman give an undertaking that the wealth tax will not be introduced until we have received the report of this Royal Commissilon?

The Prime Minister: The wealth tax will be considered by a Select Committee of this House. That will put the matter entirely within the control of this House since a Select Committee will report on it and then Parliament has to debate it before it becomes law. It is totally under


our control. I do not believe that we can place the legislative process of this House in commission, even to a Royal Commission.

Mr. Peyton: Is the Royal Commission, therefore, an academic exercise?

The Prime Minister: No, Sir. If the right hon. Gentleman, by that rather silly question—[HON. MEMBERS: "Not at all."] It really was a typically silly question. If the right hon. Gentleman is suggesting that this House should not legislate until we have a report from a Royal Commission, I should be very interested to know whether he can explain why his own Government did not have a Royal Commission before the Housing Finance Act and the Industrial Relations Act.

Mr. Peyton: Has the Prime Minister noted that one of the inevitable results of what he calls a silly question is the eliciting of a very fluffy answer?

Oral Answers to Questions — EEC (REFERENDUM)

Mr. Ridley: asked the Prime Minister which Minister will be responsible for the legislation to make lawful a referendum on Great Britain's membership of the Common Market.

Mr. Marten: asked the Prime Minister when he estimates that a referendum will be held on the Common Market.

Mr. Beith: asked the Prime Minister what arrangements he has made for the organisation of a referendum on British membership of the EEC; and to which Minister he has entrusted responsibility for these arrangements.

>The Prime Minister: No decision has yet been taken on the method and procedure to be adopted for consulting the British people.

Mr. Ridley: If, however, there is a referendum, will the Prime Minister give the assurance that the Committee stage of the necessary legislation will be on the Floor of the House? Second, will he facilitate the situation of all those Members of his Government who are opposed to the referendum and who said so during the

debates in 1972 by releasing them from office in good time for them to take part in those debates on the Floor of the House?

The Prime Minister: While the hon. Gentleman's first question is a hypothetical one, I would certainly agree with what I think he has in mind—that any question of such great constitutional importance, if it became non-hypothetical, should be taken through all its stages on the Floor of the House. On the second part of his question, which I do not believe is for me to answer now, perhaps he missed in the heat of the election—we were all very busy—the fact that a number of my right hon. Friends who had taken a line on that question made their position clear during the election. Therefore, what he is asking no longer arises.

Mr. William Hamilton: Does my right hon. Friend recollect that the late Dick Crossman once suggested that we should have a pre-legislation Select Committee on matters such as this which cut across party boundaries? Will he therefore consider that, if there is to be a referendum on the Common Market, he should set up such a Select Committee and that I should be the chairman of it?

The Prime Minister: Since that proposal comes from so impartial a source with no interest in the matter, I will certainly give it the fullest consideraion.

Mr. Marten: As there are so many preparations to be made before we have a referendum—no doubt the Government will consider the Conservative Government's precedent over the Northern Irish referendum—will the Prime Minister announce as soon as possible whether we are to have a referendum or not? Second, will he consider having consultations with the various shades of opinion, regardless of party, throughout the House on this most important matter before he brings forward legislation?

The Prime Minister: Should this particular procedure be resorted to—I repeat that there has been no decision—I agree that it would be a matter of very great constitutional importance. I think I would agree with the hon. Gentleman—I should like to consider it—that it should be a matter for general consultation throughout the House.

Mr. Ashton: Will my right hon. Friend give an assurance that as a referendum is included in the Labour manifesto there will be a three-line Whip on it on the Government side of the House?

The Prime Minister: I owe my long survival rate in this office to the fact that I never interfere with the Chief Whip.

Mr. Beith: If there is to be a referendum on British membership of the EEC, will the Prime Minister ensure that the verdict of the British people is also sought on such other major constitutional issues as electoral reform and parliaments for Scotland and Wales?

The Prime Minister: Concerning the latter part of that question, my right hon. Friend the Leader of the House and I have said exactly what will be the procedure to be followed. I would take the view—I hope that right hon. and hon. Members in many parts of the House would also take it—that the question of membership of the Common Market is a very special case, particularly as the terms on which we entered were so much a matter of controversy and, indeed, have proved in certain respects so disastrous, and I should certainly not seek to extend that principle to any other subject.

Mr. Faulds: What will be my right hon. Friend's position if after the renegotiations the House votes to remain in Europe, if the verdict of the referendum is that we should remain in Europe and if the Labour Party Conference is still opposed to it?

The Prime Minister: I shall flatter my hon. Friend by suggesting that he is too intelligent really to believe the kind of nonsense which inspired that question. [HON. MEMBERS: "Oh."] I will, nevertheless, answer the question. Those of us who have taken the view—my hon. Friend was elected on the issue too, in two elections this year—that the decision should be taken freely by the British people through the ballot box, and who take the view also that whatever that decision is it must be accepted—whether or not any one of us likes it—I myself or any other members of the Government or anyone else—will accept that that is the decision of the British people. I hope, therefore, that my hon. Friend,

on his own particular hypothetical question, is also prepared to tell the House that, whatever the decision, he will accept it.

Several Hon. Members: rose——

Mr. Speaker: Order. I think that this is now the moment to move on to the business for next week.

BUSINESS OF THE HOUSE

Mr. Heath: May I ask the Leader of the House to give us the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): The business for next week will be as follows:
MONDAY, 18Th t NOVEMBER—Second Reading of the Housing Rents and Subsidies Bill.
Motions on the Northern Ireland Social Security and Pensions (Increase) Orders.
TUESDAY, 19TH NOVEMBER—Second Reading of the Offshore Petroleum Development (Scotland) Bill.
Motion on the Food Subsidies (Tea) Order.
WEDNESDAY, 20TH NOVEMBER—Supply (1st Allotted Day): There will be a debate on Rates, which will arise on a motion for the Adjournment of the House.
Motion on the Agriculture (Tractor Cabs) Regulations.
THURSDAY, 21ST NOVEMBER—Second Reading of the Social Security Benefits Bill, and of the Road Traffic (Seat Belts) Bill.
FRIDAY, 22ND NOVEMBER—Private Members' Motions.
MONDAY, 25TH NOVEMBER—Supply (2nd Allotted Day): There will be a debate on Agriculture.

Mr. Heath: Last week the Leader of the House announced that the motion on Norton Villiers Triumph Limited would be taken on Monday of next week, but it does not appear in the business which he has announced today. Will the Leader of the House give the reasons


for postponing this debate and say when we are likely to have this order? It would seem desirable, in view of a great deal of speculation, that it should be taken at an early date.
Second, on the question of the Price Code, the impression given by the Leader of the House last week, and by the Secretary of State yesterday, was that there will be no debate on this until the actual orders are put before the House. When my right hon. Friend the Member for Farnham (Mr. Macmillan) was Secretary of State for Employment, he gave the House a firm undertaking that there would be a separate day's debate on the orders in their provisional form so that the Government and everyone else could take note of various proposals put forward before the final authoritative orders were placed before the House. We feel that it is absolutely essential that there should be a separate day's debate on the orders and that having the matter mixed up with a general three-day Budget debate is quite inadequate. Yesterday the Secretary of State herself emphasised what we all know—the immense complexity of the code as it has now been amended. Will the Leader of the House kindly give attention to that point?
Lastly, as the Leader of the House will be aware and as the Secretary of State for Scotland is certainly aware, the education situation in Scotland is in a critical state. Will the Leader of the House ask his right hon. Friend at least to make a statement to the House about this matter on an early occasion next week?

Mr. Short: On the first point, certain difficulties have arisen between the Meriden Co-operative and Norton Villiers Triumph Limited. I felt that it would be much better if these difficulties were resolved before the order was debated in the House. But the order will be put down in due course.
On the second point, about the Price Code, my right hon. Friend the Chancellor of the Exchequer described the changes in the code. As the right hon. Gentleman the Leader of the Opposition himself acknowledge, we allowed a fair time for a debate on the Budget. Nevertheless, he is making a fair point which certainly we can discuss through the usual channels.
On the third point, my right hon. Friend the Secretary of State for Scotland will be making a statement in the House in the very near future.

Mr. Dalyell: When is "the very near future"? Could it possibly be tomorrow?

Mr. Short: It certainly could possibly be tomorrow. I can inform my hon. Friend and the House that the Secretary of State has assured me that he will be making the statement at the very earliest possible moment.

Mr. Heath: May I express my appreciation to the Leader of the House for what he said about the debate on the price orders? We shall discuss the matter through the usual channels.

Mr. Grimond: Will the Leader of the House consult the Secretary of State for Scotland about providing an opportunity for discussing the awkward situation which has arisen owing to the error of the late Conservative Government in bringing in the reform of local government in Scotland in advance of devolution? This is now causing very great difficulty, as there are arguments on both sides. Will the right hon. Gentleman provide time for this matter to be discussed in the House?

Mr. Short: I certainly recognise the problems involved. I have promised a long debate very early in the new year on devolution. This kind of subject can be discussed then.

Mr. Stallard: In view of the very serious deterioration in the situation in Northern Ireland, will my right hon. Friend consider a very early debate on that matter because of the real threat of a drift into an even worse situation?

Mr. Short: I share my hon. Friend's fears about Northern Ireland. There will, of course, be a short debate next week. We are discussing at present—I have discussed it through the usual channels—the possibility of setting up a number of committees to discuss Northern Ireland matters. But certainly I shall bear in mind what my hon. Friend said.

Mr. Monro: Is the Leader of the House aware that the situation with regard to education in Scotland is so serious that about 300,000 children are missing schooling each day? Will he bear in mind the


possibility of having a debate subsequent to the statement by the Secretary of State?

Mr. Short: I cannot promise a debate, but I have promised the House that there will be a very early statement on the situation.

Mr. Stonehouse: As the most serious danger facing the world is a world food shortage, with a dangerous threat of widespread famine, especially in Third World countries, may we not have a debate on the subject to discuss what contribution this country can make towards helping improve the position?

Mr. Short: I am afraid that I cannot promise a debate on that subject this side of Christmas, but I shall certainly bear it in mind.

Mr. Gordon Wilson: Will the Leader of the House consider referring the Offshore Petroleum Development (Scotland) Bill to the Scottish Grand Committee? The right hon. Gentleman is the Leader of the House, but he is also the Minister in charge of devolution. Is he aware that this is the type of Bill which would have been discussed before a Scottish Assembly? By its being brought before the whole House, Scottish Members may be impeded in their attempts to contribute to the debate.

Mr. Short: I cannot accept the hon. Member's last observation or any of the premises on which his question is based. I feel that a Bill of this significance and urgency should be debated on the Floor of the House.

Mr. Douglas Henderson: On a point of order, Mr. Speaker. Will you clarify the position on this matter? Would it be possible for the House to refer the Bill to the Scottish Grand Committee if a motion to that effect were tabled and moved before Tuesday?

Mr. Speaker: I would rather take the point of order at the end of business questions.

Mr. Spriggs: Has my right hon. Friend considered that there are conflicting opinions about the compulsory wearing of seat belts in cars? Will he arrange for a free vote to be taken on the Bill?

Mr. Short: My right hon. Friend the Chief Whip has already announced that there will be a free vote on the Bill.

Mr. du Cann: Has the Leader of the House given thought to the timing of a debate on the work of the Public Accounts Committee in the last Parliament? Ordinarily it would be taken before the end of December, but the House is now in a difficulty because few, if any, of the papers—and certainly not the report—have been in the hands of Members, owing to printing difficulties. Will he undertake to arrange for the debate to be held early in the new year?

Mr. Short: I shall look at the problems involved in this without making any promises and will do what I can to meet the right hon. Gentleman's point.

Mr. Stott: Will my right hon. Friend consider giving time for the House to discuss the report of the North West Strategic Study. Some 50 hon. Members were returned from the North West and wish to discuss this important document which, with its far-reaching proposals, fundamentally affects our region.

Mr. Short: I have a great deal of sympathy on this matter, as I have told the hon. Member for Lancaster (Mrs. Kellett-Bowman) when she has asked me the same question on a number of occasions over a long period——

Mrs. Kellett-Bowman: Since May.

Mr. Short: The hon. Lady is quite right. The difficulty is that we have had a Summer Recess and a General Election in between.

Mr. David Price: Has the Leader of the House seen Early Day Motion No. 12 standing in my name and those of 26 other hon. Members seeking to refer the future of the HS146 short-haul civil airliner project to a Select Committee? Will the Leader of the House be tabling an appropriate motion?
[That this House requests the Leader of the House, as a matter of urgency, to move to refer the future of the HS146 short-haul civil airliner project to an appropriate Select Committee for study and advice, and that this project be maintained until the report of the said Select Committee has been published, replied to by the Government and debated by this House.]

Mr. Short: We are very anxious about this project and the Government are considering what action to take on it.

Mr. Hooley: May I refer to the point raised by my right hon. Friend the Member for Walsall, North (Mr. Stonehouse)? Millions of people are on the edge, and some over the edge, of starvation. Is this not a matter for attention by the House, and could we not before Christmas have a debate on overseas aid and the world food situation?

Mr. Short: I cannot promise that. We have a heavy programme and we must get our legislation well on the way before Christmas. I realise the importance of the subject, and we referred to it in the Queen's Speech. When there is an opportunity, I shall try to arrange a suitable debate.

Mr. Rifkind: Is the Leader of the House aware that a statement by the Secretary of State for Scotland on the Scottish teaching crisis will be of no constructive value since that right hon. Gentleman's views are already well known? Is he aware that the vast majority of Scottish back benchers, including Labour Members are critical of the Secretary of State's handling of the matter? Is that why the Leader of the House has refused to permit a debate on the subject?

Mr. Short: I am sure that my right hon. Friend the Secretary of State holds all kinds of views about which the hon. Gentleman knows nothing. The House had better wait for the statement. I do not think it will be disappointed when it hears it.

Mr. Roper: When will my right hon. Friend set up a Select Committee on European secondary legislation, which many of us think should be set up immediately notwithstanding the motion on the Order Paper to set up a Select Committee to consider procedure?

Mr. Short: There is a problem. I do not think I should pre-empt the work of the procedure committee. We should let it consider the matter, which I hope it will do very quickly, and make its recommendations to the House. I do not think I should set up a merits committee on secondary legislation until the procedure committee has had the opportunity of considering it.

Mr. Fletcher-Cook: On the question of the debate on seat belts next Thurs-

day, does the right hon. Gentleman agree with the hon. Member for St. Helens (Mr. Spriggs) that there is very deep feeling on both sides of the House on this issue? Will he give an undertaking that if the Bill is not proceded with by at least 7 o'clock, we should have another complete day for it?

Mr. Short: I very much hope that the business which precedes the Bill will be concluded fairly quickly, but I give an undertaking that if we find that a large number of Members still wish to speak on the second business when we approach 10 o'clock, I am prepared to see that the debate is adjourned.

Mr. McNamara: May I press my right hon. Friend on the question of a debate about the deteriorating situation in Northern Ireland? The occasion which the Leader of the House is suggesting as an opportunity for a debate is the discussion of a number of orders on Monday evening. It will be difficult to stretch the patience of the Chair sufficiently to allow us to discuss on those orders the myriad aspects of the complex situation in Northern Ireland. May I urge my right hon. Friend, in view of the number of deaths involved, particularly of British soldiers, that we should have an opportunity to discuss this matter?

Mr. Short: I agree, but the volume of Northern Ireland matters and the volume of EEC matters which need to be discussed will change the whole character of the House unless we make new arrangements. That is why we are discussing the possibility of establishing a number of Northern Ireland committees, including a Northern Ireland Grand Committee, where Northern Ireland matters can be discussed much more frequently than we could find time for in the House.

Mr. Spicer: What further step does the Leader of the House propose to enable us to have a debate on the report of the O'Brien Commission? This matter has been raised several times and many of us would be extremely grateful if a debate were permitted.

Mr. Short: I have answered questions on this almost every week and I am sorry to say that I keep giving the same reply. I give an assurance that the matter will not be changed until the House has debated it. I am pressing the matter


very hard, and my right hon. Friend the Minister of Agriculture tells me that international discussions are in progress and that he will conclude these as quickly as possible. When he does so we shall come to the House to debate the matter.

Mr. Cryer: Will my right hon. Friend institute an inquiry into the failure of the Home Office to provide information on prosecutions relating to causing an affray and conspiracy in relation to trade union affairs? Will he accept that this information is designed to show that the two Shrewsbury building workers, Dennis Warren and Eric Tomlinson, have been subject to a gross injustice? Will he accept that it is important that back benchers should be given the fullest information, especially when one other Department can lavish money and information on the European movement?

Mr. Short: I will certainly refer what my hon. Friend the Member for Keighley (Mr. Cryer) said to my right hon. Friend the Home Secretary, but my right hon. Friend tells me that he has already agreed to meet a number of hon. Members to discuss this matter.

Mr. Prior: May we have an early statement from the Secretary of State for Employment on the important questions about the Press which have been raised by NUJ action on certain newspapers? This is an important matter which the Leader of the House will appreciate, particularly in view of the amendment made to the Trade Union and Labour Relations Bill.

Mr. Short: I will refer this matter to my right hon. Friend the Secretary of State, but of course it can be discussed in the context of the forthcoming Bill.

Several Hon. Members: rose——

Mr. Speaker: Order. I said last week that I could not allow 35 minutes every week for business questions. Many of the questions today have not been related to next week's business at ail. We must now move on.

Mr. Douglas Henderson: May I raise the point of order to which I referred earlier, Mr. Speaker? It was to ask you: guidance on whether, if a motion were lodged before Tuesday and if there were time to discuss it, it would be possible to refer the Offshore Petroleum Development (Scotland) Bill to the Scottish Grand Committee?

Mr. Speaker: I am told that this is entirely a matter for the Government which can be done only on a motion by the Government.

WAYS AND MEANS

12th November

Ordered,
That at this day's Sitting, as soon as a Bill has been brought in upon the first nineteen Motions relating to Ways and Means and the Motions relating to Procedure and Finance [Money], the Question on the twentieth Motion relating to Ways and Means shall be put forthwith.—[Dr. Gilbert.]

Orders of the Day — WAYS AND MEANS

CAPITAL TRANSFER TAX

Order read for resuming adjourned debate on Question [12th November],
That a tax may be imposed on the value transferred by certain dispositions made on or after 26th March 1974 and on the value treated on death and in certain other circumstances as so transferred.

Question again proposed.

Orders of the Day — BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.50 p.m.

The Chancellor of the Duchy of Lancaster (Mr. Harold Lever): As my right hon. Friend the Chancellor of the Exchequer was opening his Budget, and drawing attention to the grave international background against which our discussions are being conducted, in the United States of America the American President was acknowledging for the first time that the United States is already in recession. When we consider my right hon. Friend's measures and analyse and appraise them, we should bear in mind the world as well as the domestic situation in which my right hon. Friend is operating.
Storm clouds of slump are gathering all over the advanced industrial nations of the world. The oil price crisis has aggravated world inflation, which again threatens us with economic and political dislocation. Britain herself faces as astronomical balance of payments deficit, not made any easier because it is accompanied by similarly astronomical deficits faced by her neighbours.
We can survive the period ahead only if we maintain our credit abroad strong enough to borrow the billions of pounds required to fuel our industries and to feed our people while we gird up our loins to get back into some more reasonable balance. I do not want to dwell again on the immense difficulties involved in the oil price explosion which has occurred this year. All I can say is that there is no hope of its solution and no hope in any of the measures we decide upon in

the House if a world slump of massive proportions falls upon us.
Such a slump can be avoided only if the level of international co-operation is swiftly and massively improved. If this country is to play the notable part that she has played so far in such international co-operation, we must run our own affairs in ways which do not discredit us abroad. We must have influence in the councils of the world.
Here I can sincerely take pride in the efforts of my right hon. Friends the Prime Minister, the Foreign and Commonwealth Secretary and the Chancellor in plugging away against much folly and doctrinaire blindness which exist in the world and which have been unable to cope with the new, baffling problems which have been suddenly injected into the world situation. We are being perilously slow, in the advanced countries of the world in aggregate, in meeting these new problems. If those in whose hands the financial decisions of the world are placed show the same level of intelligence, zeal and swiftness of response in the next 12 months as they have shown in the past 12 months, we shall all be ruined. That is a safe bet.
Everything that we are playing for depends upon international co-operation. I am ready to contrast what the present Government have done with what was done by their predecessors. Most unfortunately, when the oil crisis first broke out the then Prime Minister, now Leader of the Opposition, seemed to take a sort of Gaullist lurch, which was in grave danger of wrecking our relations with the United States.
As a passionate European, who sometimes has some difficulty in expressing that passion from this Dispatch Box, I have always seen a strengthening of our European co-operation not as something to cause abrasiveness between us, Europe and the United States but as a means of achieving that better balance in the relationship which will lead to a more effective and truer partnership between Europe and the United States.
In the present fragile world situation, which causes me more anxiety than any world economic situation in the whole of my adult life, and which is certainly the gravest the world has seen since the war, what are the problems facing the Government in running the domestic


economy so that their people perform as well as possible and their industry both public industry and the private enterprise sector is energised as much as possible? I shall not deal now with the public enterprise sector, which has been dealt with on other occasions. For the purpose of this discussion I want to concentrate, as the Budget inevitably does in its financial strategy, on the private enterprise sector.
We have three major problems in the private enterprise sector. The first is that price controls—introduced, let it be remembered, by the Conservative Party—have gradually worked with an increasing severity, not because that was intended by the Price Code but because inflation had the effect of turning the price controls into an ever-tightening noose. It is clear that unless we are to have industry performing well below its capacity, that situation must be remedied. I shall not go into details about this, because my right hon. Friend the Secretary of State for Prices and Consumer Protection explained the need and the relaxation yesterday.
The second problem is the way in which we tax profits, and the third is the atrophy of the financial institutions for providing industry with fixed-term finance for capital investment.
All these three problems are crucial to the success of our economy. If they are not dealt with, the private enterprise sector, which provides most of our exports and most of our employment, will be in a state of collapse within the not-too-distant future. It is right that we should direct our attention urgently to dealing with these three problems.
Our people have a great deal at stake here. Unemployment would rise to astronomical heights if we were to continue in the present way. Any startling decline in our own industry would produce immediate repercussions on our credit abroad, which would in turn worsen the calamity which would befall us.
I repeat that we have a great deal at stake: our employment level and the investment level of our industry, on which our future competitiveness and standard of life depend. Incidentally, with regard to investment, it is no asset to the people of this country that we are now dealing with a Stock Exchange whose level

inhibits any prospect of a buoyant investment picture. Until is it remedied——

Mr. Peter Rost: The right hon. Gentleman should tell his colleagues.

Mr. Lever: I am telling my colleagues. They are perhaps less deaf to understanding than some Opposition Members. My colleagues also know not only that investment is of great urgency and importance to us but that the security of the savings of our people and our pension funds is of great importance to us.
We are playing for high stakes. Unlike the Conservative Government, we hold the view that it is the Government's responsibility to tackle the problems. When he was Prime Minister, the Leader of the Opposition reversed the usual concept. He thought that it was the people who had to please the Government, not the Government who had to please the people. He was always marking their performance, rather than looking to his own.
I wish to quote a piece written by the right hon. Gentleman, with that interesting conjunction of petulance and self-approval which he has made his hallmark, in which he addressed the business people of this country as follows:
The curse of British industry is that it has never anticipated demand. When we came in we were told there weren't sufficient inducements to invest. So we provided the inducements. Then we were told people were scared of balance of payments difficulties leading to stop-go. So we floated the pound. Then we were told of fears of inflation: and now we are dealing with that.
This was early in his career. In fairness to the right hon. Gentleman, I ought to say that he went on to deal with the situation energetically, if not with particular wisdom, and there was no doubt that he would have gone any length down the road in fighting inflation. The Lord decreed one compulsory rest day in seven, but in the right hon. Gentleman's battle against inflation he decreed four compulsory rest days. Had it not succeeded it was evident that he was prepared to go the whole hog and make it seven out of seven.
At this point the British people were consulted and, strangely enough, they did not take the view that it is for people to conform to policies: it is for the policies to be such as will win the assent and the effort of the people concerned. The


present Government, whether dealing with our work people or employers and business, recognise their responsibilities in dealing with these three problems.
I have mentioned the price relaxations, which were timely and by no means excessive. I now turn to the question of our method of taxing profits. I know that this is a complex subject and I shall not weary the House with a display of Treasury expertise. But we have reached a point where the effect of tax on stock appreciation is raising acute difficulties for industry. Let us deal first with the cash problem and then with the tax problem.
In a rapid inflation, it is inevitable that any continuing business that wants to stay in business, even if it replaces the same volume of stock each year as it had before, is under financial pressure to provide more and more money to increase the same volume of stock. If in meeting that pressure—I do not want to give the figures but they have run into thousands of millions of pounds extra in the last three or four years—they are taxed on the basis that they have realised their profits when they have sold their first stock, their financial position is made even worse. Contrary to popular belief, we do not tax profits. We tax realised profits. The argument is not about some analytical semantics or any god-given understanding of the right measure of profit of any company in a given year. We are concerned with what is, in a valid commercial sense, the realised profits of a company in an inflationary situation.

Mr. Ian Lloyd: The right hon. Gentleman touches on a most important and interesting point. He will be more aware than anybody that this is a subject of major national controversy between Professors Merrett and Sykes and Mr. Wynne Godley. I am sure that it would interest the House and the country to know which side of the controversy the Government come down.

Mr. Lever: I can only say that we have not yet come to a final conclusion on the correct way of permanently computing profits in the light of the different situation that now prevails. What is certain is that in a rising inflation, the

existing method of computing realised profits imposes intolerable burdens on industry. For my own part I see merit in both arguments. If the hon. Gentleman wants an off-the-cuff answer from me, I think that in an analytical way the Cambridge school is right, and as a view of the practical consequences Messrs. Merrett and Sykes may be right.
The problem is best illustrated by the apocryphal story which arose from the German inflation of 1923. A rope merchant found in that time of fantastic inflation that within three months he had sold his entire stock at an astronomical profit and he was assured by his accountant that with the proceeds he should acquire one-eighth of the stock of which he had disposed. This process went on throughout the years. He was constantly reassured by his accountant, who was rather of the Cambridge school of thought, that he was getting richer and richer. He was assured that he only had to cease trading and realise his stock to realise how much money he had made. He continued to grow richer until he found himself with only one rope left. He took the appropriate action with that last piece of stock. He thereby achieved precisely the effect one gets from reading the articles—namely, the termination of the business and the realisation of the profit.
It could be argued that instead of reaching this unfortunate end, which resulted from diminishing stock, our rope merchant could have gone out, so say some of the academics, and borrowed at interest to keep on buying bigger and better stock. There is a problem there, too. First people have not got unlimited credit. Secondly, it seems an odd argument that one should promote a system, or even add to the difficulties of the existing system, by adopting a view by which a business can continue with the same volume of stock only on the basis of a rising mountain of debt, ever more precarious, ever more exposed. In those circumstances it is obvious that one cannot get good results unless one does something to ease that situation.
There are two ways to ease such a situation. One is a question of tax, and the other a question of finance. Of course there is a third way, namely, to bring inflation under better control.
Our present method of computing tax does not measure the realised profit so much as the rate of inflation. That will be obvious because one can easily see that the greater the inflation the greater the apparent profit. It is hard to know what is the exact remedy. But my right hon. Friend the Chancellor of the Exchequer has hit on a splendid immediately effective relief which he has put into operation.
It is very important to understand the damage done by the immense burden which stock-financing imposes on our industry. I know of innumerable firms which are forced to give late delivery because they cannot afford to finance normal stock levels. I do not want to mention names, but one famous firm which has been publicised as being in financial difficulties was in the happy position that it had enormous order books at profitable prices but was not able to afford to build up stock adequately to service those orders within a practical delivery time. The Chancellor has firmly begun to put the situation right, though we shall have to wait for his final solution until we have heard from the Sandi-lands Committee.
There is one point which I cannot for-bear to make, and I make this point particularly to many Conservative Members who always believe that it is the Labour side of the House that needs instruction in commercial matters. It seems odd that the present problem had been steadily mounting during four years of Tory Government and yet received apparently no attention or sympathy from the Conservatives at all. The Conservative Government were deaf to the needs of the situation and took no action. In the very difficult circumstances in which my right hon. Friend the Chancellor of the Exchequer has had to act, he has done so with a speed which puts to shame the idleness of the Conservative Government.
The third point which becomes of growing importance is the handicap which has been imposed upon industry, because of inflation, by the atrophy of the financial mechanism for supplying medium-term finance to industry. Industry always requires some finance from outside, be it a big margin or a small margin. It needs equity finance and fixed-term finance for its capital investment in particular. It is

an unsound way of financing long-term capital investment if the industrialist has to look over his shoulder at the immediate threat of a bank calling in the overdraft on which that investment is based.
In the past, one could go to the money market and get medium-term and long-term fixed interest money. I will not now deal with the equity supply, although it, too, has gone, or has practically gone, for the time being. The fixed-interest problem has been increasing for years. It has called for remedy for years, but again no action was taken by the Conservative Government. This supply of long-term money has now virtually dried up, and although British banks provide a service probably unparalleled in the world in the short-term provision of money, it is a specialised service and limited to the provision of short-term money.
This is not suitable for industrial investment. Technological change has made investment projects larger and longer to bear fruit, and they are, of course, riskier. A firm often has to choose between the risk of a major investment and the risk of making none. If it makes the wrong choice, it may well go bankrupt, but bankruptcy can be staved off longer if it does not invest. So, when short-term money is available, we tend to have less investment than we should have and not the quality of investment that we would have if the market were not distorted in this way. All we need is a new facility to provide longer-term finance for credit-worthy firms which used to be able to raise such finances on the money market but can no longer do so.
I have described such a facility as an "investment bank", because if one created such a body it could provide this facility. But I emphasise that it is not a new institution and that Ministers—least of all myself—are not going round with cheque books, as some of the more fanciful articles in the Press have suggested might be possible. It does not require Government money or subsidy. Nor have I envisaged it as a facility for propping up incompetent firms. The expansion of Finance For Industry announced by my right hon. Friend provides exactly the agency I was advocating long before the present Government took office.

Mr. Michael Heseltine: There is a critical question. If the medium-term money market has dried up because the rates of interest were too high to attract money in that particular form of lending, how is recycling much the same sort of money through the institution of the FFI, at much the same interest rates, going to recreate that kind of facility?

Mr. Lever: If the hon. Gentleman had been a little more patient he would have realised that I was going on to deal exactly with that problem.
Great credit is due to the Governor of the Bank of England, the clearing banks and the institutions for their readiness to co-operate so quickly in response to the suggestion that industry might obtain help by an assured supply of longer-term finance for investment. It took a Labour Government to see the possibilities of harnessing the good sense of the City in the service of industry, investment and employment, and to achieve it on a voluntary basis.
I believe that the step we have taken will ultimately develop with a major impact on the future efficiency of British industry. Its operation will involve the banks much more closely in the investment decisions of industry, since the banks will necessarily take a closer interest in the customers to whom they provide longer-term finance. The banks will themselves add, through their financial expertise, to the commercial and industrial expertise in the firms they are supporting to a greater extent than in the past. That will be a beneficial feature of the new mechanism for providing longer-term investment finance which was lacking in the mechanism that it is replacing.
If my hopes are fulfilled, we shall be better off in the longer-term or in the medium-term future with this system operating than we would have been if we had a capital market in medium and longer-term interest loans.

Mr. Peter Hordern: Does not the right hon. Gentleman realise that what industry requires is not expensive loans of whatever length of term but improved cash flow, which could be achieved by greater freedom in pricing? Does not he also recognise that,

to the extent that the institutions will subscribe to his fund—£1,000 million—they will be less able to subscribe their part of the borrowing requirement upon which the Government are relying so much?

Mr. Lever: I thought that the hon. Gentleman had every semblance of being awake during my speech, when I was emphasising the crucial interest in improving cash flow and loan money in the form of relaxation of price control and adjustments of the tax system, both of which have been done. The hon. Gentleman seems to have ignored them. He wants even more. I agree that if Santa Clause could arrive very conveniently on the scene with cash in his sack we would be better placed, but we have to live in the real world of restricted resources.

Mr. William Clark: If one wants to give increased cash flow, rather than defer tax through manipulation of stocks, would it not be better to reduce corporation tax from 52 per cent. to, say, 45 per cent.?

Mr. Lever: That would affect firms which are not affected by the stock question and would correspondingly reduce the relief which we can focus on those most affected by the stock question. As a general argument, I do not think that it can be denied that industry would like more cash flow and lower taxation, but we have attended to the cash flow and profitability question and we have attended to a great improvement, even though necessarily an interim one, in the tax question.

Mr. Hordern: What about the borrowing requirement?

Mr. Lever: The hon. Gentleman seems to suppose that this affects the borrowing requirement. I must confess that the hon. Gentleman certainly deceived me in giving every appearance of being awake. I made it clear earlier that these funds were coming from within the banking system. They have nothing to do with Government borrowing. They are funds which otherwise would be available for short-term borrowing.

Mr. Hordern: indicated dissent.

Mr. Lever: If the hon. Gentleman wants a detailed dialectic with me, we


must do it outside. I must make it clear to him that this is a shift of money over a period from the short-term lending which industry willingly agrees is unsuitable to finance its capital investment. It will over a period change into medium-term or longer-term lending, but lending in the form which encourages investment and the right kind of investment.
No doubt some of it will move away from the kind of investment which is less fundamentally necessary to us all and which could afford to take the risks of short-term borrowing. For example, if a man is going to open a night club he is more ready to finance it with short-term borrowing, whereas if a man plans to build a factory for export manufacture we are providing now a mechanism which will shift some of the money which might have gone to the night club into the direction of the factory, and we are achieving it without detailed or bureaucratic controls. It is a shift from one kind of lending to the more advantageous lending which traditionally existed but which exists no longer. If the hon. Gentleman cannot understand this from my speech, I shall be happy to have a seminar for him or any other hon. Member who needs more detailed instruction. It is a voluntary matter and not one to which the Government can direct or give detailed consideration.
I am confidently hopeful that this institution will meet the challenge which has now been recognised of providing a stable form of long-term and medium-term finance for industry for exports and for capital investment. I shall be disappointed if it does not perform for capital investment in industry the same kind of service that the building societies now provide on a far more massive scale for home-owner buyers. It is an odd situation——

Mr. Norman Atkinson: rose——

Mr. Lever: Perhaps my hon. Friend will allow me to finish my sentence. Building societies collect short-term money and are able to lend it out because it is short-term money and because of the healthy organic structure of the good credit that they enjoy. They are able to lend out short-term money for periods

as long as 20 years because they are able to pay the short-term rate and to gear the long-term rate to the short-term rate.
We have not had an institution of intermediation available for capital investment in industry. That has been the position. But now we have the beginnings of just such an institution. It will be able to intermediate short-term money as well as a mix of medium and long-term money. It will be able to draw on short-term funds and safely lend those funds long because of its undoubted credit and undoubted access to the short-term money markets. It will provide the same kind of service which is now provided by the building societies on the housing market.

Mr. Atkinson: If Finance for Industry and the new arrangements which have been voluntarily agreed will not adversely effect the yield the banks would normally expect to derive from their previously short-term loans, what has now happened to make the banks agree to the new arrangements? Why has the advent of a Labour Government suddenly made the banks conscious that British capitalism needs this new facility? Why was there something missing in the past whereby there was a starvation of medium-term loans that have now suddenly become available? What has happened, other than the charm of my right hon. Friend, to bring about this amazing conversion on the money market?

Mr. Lever: I do not wish to belittle the impact of the last item that my hon. Friend mentioned. I attribute the change to the growing gravity of a situation in which firms have been saying, "We shall borrow short term for the time being and we hope to fund it later by a long-term loan or with an equity issue". That has meant a mounting debt at the banks that has been added to by the impact of the increased cost of financing stocks even to maintain them at the same level. It is that situation that has brought matters to a crisis.
Although I have twitted the last Conservative Government on this matter, I think that they might have acted a lot earlier and have offered a similar suggestion. The matter becomes monthly more serious as the mounting burden of short-term debt tends to distort much to


our disadvantage the pattern of investment and the pattern of industry's stock-keeping. The result of the institution which we have in mind will be a more effective deployment of private enterprise funds in the direction of sustained employment and investment. There will be a more effective deployment in a direction that my hon. Friend the Member for Tottenham (Mr. Atkinson) would wish to see. If he were familiar with the details of the matter—I am not being patronising but this is a complex matter which has been rather ill reported in the newspapers and ill explained and has confused others of my hon. Friends——

Mr. Atkinson: You can rest assured, brother, it has not confused me.

Mr. Lever: If my hon. Friend is not confused there are evident signs of confusion in some of the newspapers and from some of my colleagues. I have some responsibility for that because when I threw out this suggestion I was not able to go into all the details and to explain it. When dealing with it my lips were sealed although not completely sealed.
I am happy to explain in sum that we now have a new instrument of intermediation which will be able to cheapen medium and long-term lending because it will be in a position to process a mix of medium-term and short-term funds. In concept it will be an entirely voluntary institution. It will in no way prejudice any other proposals, such as the NEB, about which some people are very anxious. By removing the three handicaps to private industry my right hon. Friend has done more than anything else to protect employment and to promote investment.
We are safeguarding the present standard of life of our people and the present employment prospects of our people. As far as we can, in this dangerous and uncertain world, we shall safeguard the future prospects and standard of life of our people by these investment incentives. I have stressed the grim background against which my right hon. Friend is forced to act. There are also difficulties at home. However, that does not justify the utilising of the crisis, as has been done, to secure party political points or to arouse defeatism. I mention that not to excuse the Government from any of

their failings. I dare say that we shall eventually be proven to have some. It is not in the interests of our people if the dangers under which we are operating are used in the facile party political way that we witnessed from the Leader of the Opposition in instant response to the Chancellor.
I realise that some of my hon. Friends do not find price control relaxation palatable. By the tax relaxations which I mentioned there is an undoubted influence on the cash flow to private industry. My hon. Friends must realise that we are necessarily pledged to a vigorous and successful private enterprise sector as well as to a successful public sector. It would be naive to believe that if for any reason our private enterprise sector were allowed to break down we would achieve strength through cataclysm. Nothing of the kind would happen. We would not achieve a sudden sprouting or flowering of a Socialist or public-ownership sector.
If the private sector broke its back all possibilities of success would be undermined in extending and invigorating the public sector. I beg some of my hon. Friends who have been too ready to criticise my right hon. Friend to bear in mind that he has been fighting to defend the high level of employment that they are most anxious should be preserved. He is fighting to defend our investment, our future standard of life and future competitiveness. He is fighting to protect from the danger of literal destitution and disaster next year, for the reasons that I have mentioned arising out of the international situation, the weakest and poorest people in our land. Had he sat back and not courageously and with intelligence fought to revive and invigorate our private sector in these difficult
circumstances——

Mr. Wyn Roberts: Does the right hon. Gentleman envisage that something similar to the FFI may now be necessary for agriculture?

Mr. Lever: We have an Agriculture Mortgage Corporation. I should need to consider the situation so as to determine what might be done. Something similar to the FFI might improve the financial facilities for agriculture. I must confess that I had not thought that long-term fixed-interest finance was one of the afflictions of agriculture.
I now want to bring this speech to a conclusion. The Chancellor has met the needs of our time this time. He has courageously and with confidence applied himself—[Hon. Members: "Oh."] I think that some of those who are ready to criticise him might bear in mind that he can afford with a good conscience the increased profitability necessary from a thriving private sector with high employment investment levels, because in every Budget he has been increasing his control over personal incomes and their taxation and management.
Perhaps some of those, who may include hon. Members on this side of the House, who do not immediately respond with enthusiasm to some of the Chancellor's more severe measures on private income will bear in mind that some of those severe measures have made possible these concessions to the company sector precisely because the other measures ensure that the funds thereby conceded cannot result in an undue or unfair advantage to individuals who are in a position to bear heavy rates of tax.
I therefore have no difficulty whatever in pledging full support to the Chancellor in these measures. I am sure they are the right ones. I am sure that when the House has had time fairly to consider them. hon. Members will join in supporting the Chancellor in the fundamental proposals which he has made in these three important respects to bring aid to British industry.

4.32 p.m.

Mrs. Margaret Thatcher: It is a pleasure to be opposite the right hon. Gentleman the Chancellor of the Duchy of Lancaster once again. It happened first about seven years ago when we were both in similar positions. I remember his great enthusiasm then for international co-operation. It took the form of being one of the first to tap the Eurodollar market for financing the nationalised industries in Britain.
The right hon. Gentleman used to take me to corners in the House to give me a little financial homily—believe it, or not, on the wisdom of not borrowing short to lend long and on the great wisdom of borrowing longer from Europe to lend shorter on some of the IMF commitments.

Mr. Lever: The right hon. Lady has benefited imperfectly from the instruction. What I said to her was that for overseas borrowing we ought to borrow long and not short because we would thereby shield ourselves from runs on the currency. I have never said that borrowing short and lending long is in itself undesirable within the domestic system. That would mean the end of the building societies. The FFI would never have started. I have never had any such view as the right hon. Lady attributes to me.

Mrs. Thatcher: Clearly I shall have to have another lesson. I was rather alarmed when the right hon. Gentleman compared the FFI to building societies, in view of my problem with building societies while in my last Shadow job.
One thing that I remember from my previous experience with the right hon. Gentleman is that he always had a borrowing answer to every single problem. I always felt that I could never rival him at the Treasury because there are four ways of acquiring money, to make it, to earn it, to marry it and to borrow it. He seems to have experience of all four.
The right hon. Gentleman spoke warmly about private enterprise. I only wish that some of his colleagues would speak as warmly about it as he does. I think the right hon. Gentleman probably has more battles with his back-bench colleagues than he does with hon. Members on the Front and back benches on this side of the House. He showed his great skill when discussing the Merrett and Sykes and Wood and Godley theories, in coming down on both sides of the argument. It is a skill which must stand him in very good stead at Cabinet meetings. Some of us feel that just as I have been a statutory woman in the Cabinet, he is perhaps a statutory moderate in the Cabinet now.
The right hon. Gentleman spoke in a clear way about the problems of taxation on stocks during times of inflation and said that we had not really got down to inflation accounting. When I first came into the tax business I considered the Report of the Royal Commission on the Taxation of Profits and Income in which Lord Radcliffe came down against having inflation accounting because the figure of inflation was comparatively small, although they


thought it comparatively large. The right hon. Gentleman is wrong to say that we did nothing about it. We appointed the Sandilands Committee from which we shall shortly receive a report, although I understand from the Press that the report will take longer in coming than we hoped.
The right hon. Gentleman will also know from his tax experience that companies are taxed on profits computed according to the current commercial method of accounting. That principle has recently been affirmed, but the problem is that there is no agreed method of commercial accounting in periods of inflation, and until we have that agreed method it is not easy to alter the basis of the tax otherwise than on an ad hoc principle. The right hon. Gentleman enlarged upon the ad hoc principle and wisely gave the example of a continuing business, unlike the Cambridge school which gave an example of one which was not likely to continue very long.
May I refer to the "bankable assurance", about what will happen to taxation on stocks next year, and point out that a bankable assurance may be all right for a continuing business but that it is not all right for a liquidator if the business goes bust in the meantime. This is a detailed point that we might consider on the Finance Bill.
Before going on to what I wanted to say, may I say that I was a little concerned about one or two things which the right hon. Gentleman said about the FFI. Most of us agree that we would rather have this sort of facility in private hands, and it is a good idea to set it up, but I do not think there is a good parallel with building societies. One thing which concerns some of us, particularly those who have ever been connected with some of the institutions which are expected to put up some of the finance—for example, insurance—is that the duty of insurance companies is first to look after their beneficiaries. To do this they need to match their liabilities with their investments, and I hope that by investing in this kind of institution there will be no question whatsoever of their having to put the interests of their beneficiaries second. I think they would be in considerable difficulty if they had to do that.

Mr. Atkinson: That is an important point. It slots into this debate very acutely indeed. If the right hon. Lady is philosophising on the basis that insurance companies and other financial institutions should put the interests of the beneficiaries first, would she not also say that that was a correct posture for the trade unions to take? The Conservative Party seemed to be accusing the trade unions of ignoring the national interest, and now the right hon. Lady says that the interest of the beneficiaries comes before the national interest.

Mrs. Thatcher: With respect, I was speaking on the basis of a legal contract, not a social contract. The two are quite different things as the hon. Gentleman knows.

Mr. Atkinson: If there is morality in law, then surely these things must equate one with the other, because this is what the argument is about.

Mrs. Thatcher: Perhaps the hon. Gentleman could equate them by making his contract legal as well.
In 15 years of listening to Budget speeches, and that is a lot more than 15 Budget speeches, I have never known a Chancellor take so long to communicate so little to the general public. Not even the price increase in petrol came from him. Instead it came from one of his colleagues. It was a very long speech to say not a great deal. I appreciate that he was in some difficulty. It was not the difficulty of steering a course between the objectives of curbing inflation and providing jobs. We all know about that difficulty.
It was not even the difficulty that he could not do exactly as he wished because of external constraints. We all know and appreciate those difficulties and how they might mature next year. The difficulty he was really in was of trying not to reveal that if he was right now he was wrong in his March Budget. It seems to us that part of the task of this Budget is to put right some of the wrong decisions in the March Budget which my right hon. and hon. Friends were continually pointing out at the time of that Budget and also during the passage of the second Budget, when they once again referred to the liquidity problems affecting companies.
I want to follow the Chancellor of the Exchequer in some of the questions which he raised and left unanswered. The Chancellor of the Duchy started with the private sector. I want to begin with the nationalised sector. The Chancellor of the Exchequer put a lot of his strategy on raising prices in the nationalised sector but did not begin to tell us by how much. Can we contrast his attitude in March with his attitude in November? On 26th March he called the deficit of £800 million
deficits on an appalling scale".
He said:
We could not allow the existing state of affairs to go on … the situation had gone too far to be rectified completely by a single round of price increases."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 300.]
He then went on to announce the actual increases, electricity 30 per cent., rail 12½ per cent. to 15 per cent., and increases for the Post Office.
It was interesting that when the Chancellor had been in office for only three weeks he had grasped the problem and quantified the solution. Now contrast what happened in November. The deficit of the nationalised industries was now running at £1,000 million a year. Again it was the same story:
it is impossible to achieve a realistic level all at once".
I accept that. I know it is. I have been in Government trying to eliminate deficits. The objective was:
to phase out these subsidies completely as fast as possible ".—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 268.]
The interesting thing was that although he had been in Government for eight months he could not then quantify the necessary increases. Either he could not or he would not. I do not know why. He knows that the deficit of the nationalised industries, the six main ones, according to a Written Answer of 5th November, was £650 million. He knows that to eliminate even that, let alone the deficits on some of the others, could involve a substantial increase in prices.
I do not understand why he has refused to give those increases when he made that the cornerstone of his strategy. We therefore have to rely upon the Press because it appears to have done some work on price increases. It says that gas will go up by about 15 per cent. and electricity by about 25 per cent. In the

Price Code the right hon. Gentleman not only wants the industry to break even, he wants it to make a modest surplus, again for obvious reasons. My right hon. and hon. Friends know of the years we spent, when previously in Opposition, trying to get yardsticks for the efficiency of nationalised industries. The normal yardstick is competition but it is not there with a nationalised industry.
It is difficult to substitute another except by fixing certain targets. The Chancellor has fixed certain targets—that prices should secure "a modest surplus" in 1975–76. But he knows that he will be in political difficulty and may not be able to achieve his objective. We saw that at Question Time this afternoon. Already the complaints are coming in that these deficits should not be eliminated. How does he propose to make his aims clear to those who are responsible for putting forward wage claims in the nationalised industries?
If the right hon. Gentleman's objective is to eliminate the deficit then surely what he is saying is that any wage claim that is granted in the nationalised industries will automatically be passed on to the consumer. It is not a confrontation between those who work in the industries and Government. If there is a confrontation it is between those who work in such industries and those who will ultimately pay consumer prices. Will he attempt, in any way through the directive mechanism or other mechanisms, to make that clear to those responsible for putting forward wage claims in the nationalised industries?
In his broadcast the Chancellor of the Exchequer said:
If you're on the shop floor you can force young company into bankruptcy by asking for wages you know it can't afford.
There is no such limit on the nationalised industries. We noted yesterday that it was suggested, for the first time to the knowledge of most of us, that there should be a penalty on companies which went beyond the social contract. But there could be no similar penalty on the nationalised industries. How does the Chancellor propose to deal with this?
I point out in passing that it seems odd to some of us that employers are not parties to the social contract yet they are the people who suffer the penalty if the social contract fails. Those who are


parties to the social contract seem to suffer no penalties at all, if it fails. I hope that the Chancellor will deal with this later.
I turn to the corporate sector with which the Chancellor of the Duchy dealt. It always seems rather interesting that with incomes policy the cry is that co-operation is the only way but when it comes to the other side of the equation, prices, somehow control is the only way, and pretty detailed control too.

Mr. Lever: The Conservatives had controls on prices, too.

Mrs. Thatcher: We had controls on both sides, as the Chancellor of the Duchy knows. There were the two sides of the equation. The right hon. Gentleman's party has taken away one side of the equation and left the other. On Tuesday another layer of detailed control was added, a whole new set of complicated rules about allowable labour cost increases and investment increases.
The danger of taking any control policy too far, and this was always inherent in incomes and prices control, is that we create a paradise for bureaucrats. We also build into the system a great deal of delay at both ends. A firm I visited the other day told me—I got it to check the numbers—that it had to fill in 750 forms for Government Departments annually. Over 500 were statutory and 250 were voluntary. However the firm felt that it had to comply. It also had great difficulty in getting answers, sometimes, out of the Prices Commission. It would find that there would be a refusal after 27 days so that it had to start all over again. Every new built-in detail makes the job of private enterprise in responding to the immediate situation that much more difficult. We should be extremely wary of this.
I know that the CBI and traders wanted the Government ultimately either to abandon price control or to substitute a general control of profits which would have been much easier for everyone to operate. But the answer was, "No, we are not going to do this", without a reason being given. I hope that the Chancellor will not keep detailed control for too long, because this is a serious problem.
On the prices side, the Chancellor says that he believes that the relief on prices will bring in about £800 million extra to the corporate sector. He gave no breakdown of that estimate. Some people think that it is on the high side for two reasons. First, a number of companies will not be able to take advantage of the maximum relief because competition will keep prices down, and, secondly, in some spheres there is a good deal of consumer resistance to increased prices.
The other problem that will arise is how far and how quickly will the price increases be passed on in wage increases, bearing in mind the structure of the social contract. One can foresee what will happen. The Chancellor's intention is to transfer money from the personal sector to the corporate sector. That can be the only meaning behind his strategy. When price increases are allowed automatically, the cost-of-living clause in the social contract will come into effect, so the price increase will not go into profits for long but will once again go into wage increases. That will mean that the price increase will give little relief to profits, and there will be a spiral.
The only two ways of relieving that, are either by inflation, which ultimately reduces the standard of living, or by unemployment, and that is exactly what the Chancellor of the Exchequer has been warning us about. I hope that he will give us a breakdown of the £800 million. and tell us how he proposes to prevent the relief from spilling over into wage increases under the social contract, thereby defeating his Budget strategy, which is to take money from one sector and put it into another.
I turn to stock relief for tax purposes and make a plea that the Chancellor will reconsider the position of small traders. At present the relief is not available for individual traders, partnerships and companies whose closing stock is less than £25,000. Administrative reasons are pleaded. I do not fully understand that. Every person who is liable to tax has to fill in a tax return. He has to show his opening and closing stock and his trading income on that return. All the figures will be there on the return, and the return will qualify the person for a number of reliefs. Why in the world cannot the return be used to qualify


that person for this extra relief? The Government did not shy away from providing extra bureaucrats for the detailed control of prices. Why do they shy away from providing extra people, if necessary, for allowing detailed reliefs. I hope that the Chancellor will reconsider that.

Mr. Tom King: Does my right hon. Friend agree that if the relief were at a lower level it could give tremendous help in agriculture? Tax bills will be coming in for the farmers, and stock is one of their problems.

Mrs. Thatcher: Yes, and it will also help many shop keepers who would otherwise be adversely affected. It will have two very good immediate effects.

Mr. Geoffrey Finsberg: Would not that also be achieved by the Inland Revenue doing what it frequently does and making a provisional assessment, and in the following year putting it right by tax overpaid or tax underpaid?

Mrs. Thatcher: Clearly, my hon. Friends are not short of ideas. I am concerned that some relief should be given because, as both Chancellors—of varying hierarchical levels—realise, small businesses have suffered for various reasons, particularly on rates, for which both parties are guilty, so let us both agree to give them some relief.

Mr. Leslie Huckfield: That is an interesting admission.

Mrs. Thatcher: I never flinch from accepting responsibility for my part in any situation. The hon. Member for Nuneaton (Mr. Huckfield) should come to some of our debates on rates.

Mr. Huckfield: I am sure that I should find far more interesting some of the debates in the 1922 Committee.

Mrs. Thatcher: I am sorry that I gave way. The hon. Gentleman did not do himself justice.
The White Paper, "Capital Transfer Tax", suggested that there would be relief both for farmers and small businesses. Relief from capital transfer tax has been provided to a limited extent for farmers, but there is no relief forthcoming for the small business. If none is forthcoming the life of the small family business will end. No family business will be

passed on to a son or daughter of the next generation. They would become one-generation family businesses. We think that that would be a great pity and would rob the nation of one of the most creative sources of new wealth provided by people who have one of the main incentives in life—to see that their children do better than they have done and to direct their efforts to benefiting their children. I hope that the Chancellor will look at this again.
The Chancellor said something about corporation tax which disturbed my hon. Friend the Member for Croydon, South (Mr. Clark). He said that one reason why he would not give relief on advance corporation tax was that it would benefit companies who had paid out most dividends, and he thought that they were not the companies with the greatest need. The Chancellor ignored completely that some companies have to finance their operations through preference shares. Those companies are already in some difficulty because dividends on preference shares are not allowed for tax, whereas if they had a higher gearing the interest would be allowed for tax. Those companies have no option but to pay the dividends, and they deserve some relief on advance corporation tax.
The Chancellor's reaction shows how shallow is his conversion to profitability and a vigorous private sector. I have previously heard him say that he likes profits, but only if they go to social purposes of which he approves. He cannot bear them going out in dividends. How he expects to get investment if people do not get a reasonable return for their investment is a mystery. We cannot and will not get investment in industry unless those who invest, whether they be trade unions, insurance companies, pension funds or individual people, get a reasonable return. I know that the Chancellor put up the dividend limit from 5 per cent. to 12 per cent., but that is not enough in today's circumstances.
The Chancellor's attitude to private savings is in general not very favourable. He never hesitates to penalise those who save. He had to have one vindictive bit in the Budget—the surcharge on savings income. Some of the people with savings income have already suffered a capital loss on the investment. They are having to take a return which does not even compensate for the fall in the value of the


investment in capital terms. This time he chooses to put an extra tax on those people. He gave us a nice little sermon:
The senseless accumulation of material goods … can no longer be regarded as the only guarantee of human happiness or the only measure of economic success."—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 255.]
That perhaps ties up with the fact that after the previous election he said:
I never save. If I get any money I go out and buy something for the house.

The Chancellor of the Exchequer (Mr. Denis Healey): I wonder if the right hon. Lady would quote the origin of that canard. I cannot recall having ever said that in my life.

Mrs. Thatcher: The Sunday Telegraph for 24th March 1974.

Mr. Healey: I read that report, but it was attributed to a conversation that I was said to have held with somebody who did not write the piece in question. I ask the right hon. Lady again to give some evidence that I ever made such a preposterous remark.

Mrs. Thatcher: It is taken from the Sunday Telegraph, but if he did not say it I am delighted. The right hon. Gentleman had better take lessons on how to invest from the Chancellor of the Duchy of Lancaster.
We seem to have got that nicely out of the way. I am delighted that we have got on record the fact that the Chancellor is a jolly good saver. I know that he believes in buying houses in good Tory areas.
I turn to another aspect affecting——

Mr. William Clark: With regard to the investment surcharge, does my right hon. Friend agree that there are many cases in which disabled people will be hit because of the surcharge? A person who suffers an industrial injury and is paid damages receives those damages for loss of earning capacity, and they must be invested. Now a disabled person getting more than £20 a week investment income will be hammered.

Mrs. Thatcher: I have heard my hon. Friend make that point cogently in the past and I hope that we can deal with it in the Finance Bill.
An interesting point which is buried in the Chancellor's Budget speech was the following:
Wage increases and other cost increases have increased public expenditure as outlined in the March Budget in current price terms …. by over £1,000 million more than the additional yield from taxation which results from inflation."—[OFFCIAL REPORT, 12th November 1974; Vol. 881, c. 250.]
I noticed that point because we have always thought that fiscal drag was positive and that the effect of inflation was to raise the revenue more than was needed to meet the extra expenditure. But that appears to be no longer true.
I saw an analysis on this by an economist some time ago, and he came to the conclusion that fiscal drag was negative. I was therefore interested to see this £1,000 million referred to. At current levels of public expenditure and current levels of inflation on income it will be necessary progressively to tax more to satisfy the demands of public expenditure.
Two points arise from this. First, we have to turn our minds to inflation accounting on Government accounts, which does not appear to have been done, although there were some thoughts about it when we were in office. Secondly, we have to turn attention to getting not only income taxes buoyant but getting more of the expenditure taxes buoyant as well. I gather that one of the reasons for this comparatively new phenomenon is that less than half of the tax revenue is buoyant and the other half is made up of specific taxes. The only increase from specific taxes is in the volume sold.
The Chancellor did something about buoyancy on indirect taxes by adding 25 per cent. VAT on petrol, so that becomes a buoyant tax. But it would be most alarming if it became necessary steadily to impose more taxation to finance existing current Government expenditure. It would be far better to build some buoyancy into indirect taxes. What would be even better would be to reduce the volume of public expenditure.
If this relationship goes on it means that Governments will taken an increasing proportion of the national income into the public sector, not to finance expenditure on new projects, but to service existing projects. I hope that I have made this point clear. It was buried


deeply in the Chancellor's speech and I wanted to discuss it.
The Chancellor's other strategy was that he hoped we would make a determined effort towards cuts in public expenditure. But again he did not say where those cuts should be made. I believe that the cuts he is suggesting are not reflected in his target. I am sorry if that is a bit Irish, but the right hon. Gentleman will see what I mean in a moment. He gave us his target that public sector programmes as a whole should not increase in demand terms by more than 2¾ per cent. a year on average over the next four years. But I look back to what we provided in our last Public Expenditure White Paper. I have tried to take the same figure, which is not always easy. On page 7, paragraph 6 of the White Paper it was stated that we hoped to put the 'increase in real terms at less than 2¾ per cent. We put it at 2½ per cent.
So the Chancellor is apparently increasing his target at a time when the growth of the economy is running at a much smaller rate than during our period in office. The right hon. Gentleman knows full well that with his forecasts growth will not be moving at all, or at least very little, in the future. If he takes an increasing proportion into the public sector very little will be left for the personal sector. That would not suit us.
I hope that the Chancellor will tell us more about the cuts he is proposing. He pointed out that defence expenditure was under consideration, but he knows that cuts in defence expenditure would be of a long-term nature and would not have any effect next year. He said that local authority expenditure accounts for 30 per cent. of public expenditure as a whole. But I have reason to know that what it is possible to do in, for instance, education, in terms of cuts in local auhority expenditure which would bite quickly, amounts to very little. What could be done on both the capital side and the procurement side was done. The only scope that the Chancellor has left is to increase charges if he wants anything to bite quickly under this heading.
I saw a headline in the Daily Telegraph saying that the price of school meals would have to go up. This was attributed to something said by the Secretary of State for Education and Science

at an education conference in Birmingham.
As the Chancellor has made public expenditure cuts another part of his strategy, we should have more details on this. We cannot judge the Budget as a whole without having more of the figures which are involved in it.
I realise that a number of my right hon. and hon. Friends wish to speak, but I could not sit down without saying at least a few words about the borrowing requirement. The Chancellor now realises, having listened to many speeches on this topic, what a great shock it was to everyone that the borrowing requirement has gone up to over £6,000 million, particularly in view of the attitude that he took about it in March, when his every effort was to get it down, for two reasons. He wanted to have an effect on the money supply—and, secondly, he said:
Our aim will be to bring about a reduction in interest rates. … It will depend on our ability to restrict public sector borrowing requirement here at home. …—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 284.]
If getting interest rates down depends on our ability to restrict the public sector borrowing requirement, that has now gone through the roof and we hope that interest rates will not go up accordingly.

Mr. F. A. Burden: Is my right hon. Friend aware that, during the period when we had no parliamentary papers, a Written Answer was given to me by the Paymaster-General in which he admitted that there was an in-built offset against inflation in the loan from Iran, that it would have to be repaid in five years, that he could not give me the exact interest rates, but that it would be repaid in American dollars? It will be interesting to know the basis of Government borrowing, how much has to be repaid in foreign currency and what inbuilt provisions there are against inflation.

Mrs. Thatcher: As my hon. Friend knows, the financing of the public sector borrowing requirement is very difficult. He is asking for information about it, as I would be.
There were one or two woolly bits in the Chancellor's Budget speech on this point—[HON. MEMBERS: "Oh."] They were not specific enough to give full


details. I know that the right hon. Gentleman has done the financing already to the tune of £5,500 million. What worries some of us that the need for the loan will outlast the willingness of some of the present lenders to leave their money here. In these circumstances, the right hon. Gentleman might have to resort to inflationary borrowing to cover the debt. I hope, therefore, that he will tell us a little more about how he proposes to finance the borrowing requirement, especially the part between the £4,000 million and the £6,000 million to which he referred in the closing passages of his speech.

Mr. Atkinson: In terms of the right hon. Lady's own statistics, if the private sector finds it very difficult to raise £3,500 million, taking the CBI's analysis of the situation, how can she say that it is inflationary to have a borrowing requirement of this kind in the public sector? Surely it must be looked at as a whole. If there is a deficit on one side, it follows that there is a surplus on the other—if the basis of the Government's policy is full employment and not excessive imports.

Mrs. Thatcher: Whether it is inflationary depends not only on its amount but on how it is financed and whether it can continue to be financed in a non-inflationary way. Apparently at the moment it is being financed in a non-inflationary way. Many of us wonder what long-term or medium-term commitments to that effect the right hon. Gentleman has.
We believe that the Chancellor of the Exchequer will be in difficulty with some of his current forecasts. He places great hopes on exports at a time when world trade is falling and, unfortunately, our own exports are falling, I hope temporarily. We feel that, instead of warning the people in clear terms of what lies ahead, he has chosen to try to blind the journalists—and hon. Members—with complications and statistics. He has opted for sacrifice by instalments. The first instalment is the petrol increases. The next instalment will be the nationalised industry price increases. The third instalment will be the increases or deductions arising from public expenditure cuts, and then we shall get increases in taxa-

tion and rates in April arising from the increased public sector expenditure. It will be sacrifice by instalments.
The right hon. Gentleman did nothing to prepare the nation for that on Tuesday. He had a highly technical Budget. Press man after Press man appeared to take the Press releases. We got what sometimes happens in Budget speeches. There was a reaction the first day which was quite different from the reactions on the following days as people began to understand the Budget. It would have been better if he had prepared the people for what lay ahead. The people were ready. The Chancellor was not. He and they will regret it.

Several Hon. Members: rose——

Mr. Deputy Speaker (Mr. George Thomas): Order. There is a very long list of right hon. and hon. Members who wish to speak. I hope that right hon. and hon. Members who are called will bear that fact in mind.

5.15 p.m.

Mr. Ifor Davies: I shall comply with your appeal, Mr. Deputy Speaker.
This debate has already revealed the complexity of our financial institutions, and the questions and interventions of right hon. and hon. Members have demonstrated the confusion in the minds of many of us.
The right hon. Member for Finchley (Mrs. Thatcher) covered many essential points and dealt cogently with the social contract, which I shall come to in a moment. She also pointed out very movingly that the biggest achievement was for us to see to it that our children did better than we had done. It is because many of us believe that that we are sitting on these benches.
Budget debates are always wide ranging, and I have no doubt that this debate is no exception. Many right hon. and hon. Members have already listed their own priorities.
My right hon. Friend the Chancellor of the Duchy of Lancaster dealt with the expansion of Finance for Industry and gave us a great deal of detail. The right hon. Member for Finchley gave that proposition her full support.
In his Budget speech, my right hon. Friend the Chancellor of the Exchequer


also made clear that his proposals had one clear achievement in mind, which was to reconcile the objective of full employment with economic growth, social justice, stable prices and external equilibrium. But at the heart of the Budget there is a recognition that this objective depends to a great extent upon the success of the social contract, referred to by the right hon. Lady.
Yesterday, the Shadow Chancellor of the Exchequer said that the only source of new wealth and, indeed, the only way of increasing our means in the future was to increase the production and efficiency of our factories. It follows that, in addition to the important financial considerations put before us by my right hon. Friends the Chancellor of the Exchequer and the Chancellor of the Duchy of Lancaster, Britain's greatest need in order to overcome our economic difficulties is for industrial peace and co-operation. For that reason alone it is right for this Budget to place great emphasis on the social contract.
There is an urgent need to make it clear that a major priority of the social contract is to create a greater measure of industrial justice through the strengthening of the machinery of collective bargaining, conciliation and voluntary arbitration. It is a determined attempt to restore confidence in the collective bargaining and conciliation processes.
This is a difficult task. It is a tremendous problem. The achievement of a social contract is a supreme task of a democratic process. The Opposition, in their own interests, should be giving the concept of a social contract, with all its difficulties, every possible encouragement instead of deriding it and in some cases rejoicing in any possible failure or shortcoming. Perhaps the Shadow Chancellor of the Exchequer can be omitted from that criticism since he spoke recently on the radio of the need for a social contract and said that he was in agreement with it.
I want to draw attention to the difference between the destructive criticisms of a number of Opposition Members and the attitude of some of our leading trade unionists. In particular, I refer to the speech of the General Secretary of the Transport and General Workers' Union at Motherwell on 18th October. I think the House will be fair enough to recognise

that it was a courageous, forthright and significant speech and one that is relevant to our debate today. The General Secretary said, during his speech,
The main objective in the fight against inflation should be to increase the value of the pay packet, not necessarily the amount of paper in it.
The Government's overall strategy on inflation, taking into account rents, rates and prices, was as important as wage claims, and the chief objective of negotiators should be to increase the value of the pay packet by co-operating with the social contract.
That was a fair and courageous statement to make against the background of the present industrial scene, and I commend those words to the House as being both constructive and realistic.
Amidst all the criticism of the social contract, I remind the House that it is often argued by hon. Members that the strength of the British constitution lies in the fact that it is unwritten, and that its strength lies in its flexibility; so, too, I put it to the House, the social contract. In this context, the spirit of the agreement is more important than the written word.
It was Sir Stafford Cripps who said:
The causes of industrial discord lie in the minds of men and it is in the minds of men that the defences for industrial peace must be constructed.
I submit that the social contract, embodying as it does a new conciliation and arbitration service, is an important step towards the construction of the industrial peace that we all so earnestly desire, and the House must realise the dangers facing the country if the social contract fails.
I have no doubt that the social contract is an appeal to the best instincts of our people, as set out in the TUC's statement of policy, which says in one paragraph:
The General Council are confident that the further development of the social contract"—
the council at least recognises that there is in being some understanding at best about the further development of this contract, and we should therefore not laugh at it but encourage it—
set out in this report will commend itself to unions … and so enable the Government to proceed with progressive policies in the industrial, economic and social fields.
There has been some criticism—and we have heard it again today—that the social contract is exclusively an understanding


between the Labour Party and the trade unions, and that management and industry have no part in it. But the Budget has destroyed that argument. One major object of the Chancellor is to raise the level of investment, and to help to do that he has eased the cash position of industry by £800 million. Surely that deserves a favourable response and cooperation from industry itself.
I remind the House that the Budget has made two main contributions to further the success of the social contract, especially in the sphere of public expenditure. First, there is the provision of help for those who are least able to withstand the impact of inflation—above all, pensioners and families with young children. These measures will bring relief to three of the largest groups living in poverty—the old, the low paid and the one-parent families.
Secondly, I welcome the other main contribution to further the success of the social contract in the sphere of public expenditure, such as housing, which the Chancellor indicated would be given
top priority to making up the ground lost between 1970 and 1974".—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 272.]
That is a declaration of the greatest importance in the eyes not only of some of my constituents but also the 50,000 people in Wales who are on waiting lists for rented accommodation. Every family that is inadequately housed is a standing rebuke to a civilised society, and local authority housing lists get longer and more intractable to deal with. I am sure that every hon. Member during his constituency interviews has to listen to pitiful tales about housing conditions, and I am certain nobody will deny it is a heartbreaking experience.

Mr. John Gorst: I understand the hon. Gentleman's point about the contribution that the Budget will make to those who are dependent upon the State for provision, and I agree with what he said, but can he tell the House in what way either the Budget or the social contract will help self-employed and professional people in the middle income groups?

Mr. Davies: Increased welfare benefits will make a contribution, especially to those people to whom the hon. Gentle-

man refers. The Budget is planned to fight the big issue of inflation. That is the biggest difficulty facing the people whom the hon. Gentleman has in mind.

Mr. Gorst: The Budget will increase prices.

Mr. Davies: The whole object of parts of the Budget is to cope with increased prices, and all people will benefit from its provisions.
To conclude, I welcome also the recent announcement on housing by my right hon. Friend the Secretary of State that he is investigating the possibility of an emergency programme. This is a new feature of our policy, and I hope that my right hon. Friend will be successful with it.
I am pleased therefore to applaud a Budget that gives a clear commitment that, in the sphere of public expenditure, housing will be given top priority, not only to sustain the social contract but because the provision of homes for our people is the greatest of all our social services.

5.27 p.m.

Mr. Maurice Macmillan: I hope the hon. Member for Gower (Mr. Davies) will forgive me if, in the cause of brevity, I do not seek to follow his extremely interesting line of argument.
In common with most hon. Members on this side of the House, I have listened with slightly astonished gratification to a number of right hon. and hon. Gentlemen making the same kind of points as we made when we were in Government and on which they poured such scorn. They are now using the arguments that we put forward at the election but which they were so careful to avoid until afterwards.
One was not surprised to find oneself in a fair measure of agreement with a great deal of what was said by the Chancellor of the Duchy of Lancaster, except when he sought to distract the attention of the House from the divisions in the Labour Party by trying to pretend that the fault lay in the sins of omission of a previous Tory Chancellor rather than in the sins of commission of the present Chancellor of the Exchequer in his March Budget.
I confess that I am not so alarmed as are some of my purist colleagues on this


side of the House at the extension of the Finance for Industry organisation. Indeed, I went so far as to suggest some such thing in my election address so I cannot altogether blame the Chancellor of the Exchequer for taking it up, though I have not had the privilege of conferring with him in corners, as my right hon. Friend has.
We heard the Chancellor of the Duchy of Lancaster talking about reliance on capitalism. It represents a welcome change of emphasis by the Government as a whole, although I fear that the change may be but skin-deep.
It was Hamlet who said:
Conscience doth make cowards of us all",
but I do not think that it was either conscience or cowardice that led the Chancellor of the Exchequer to talk so blithely of our prospects as a country before and during the election, although it may have had something to do with his reluctance to be more explicit in his Budget speech and to leave so much to be spelled out later by his colleagues, either in different parts of this debate or in successive debates later.
I should like at some stage answers to two points. First, the Chancellor must in his Budget be deliberately planning for a margin of slack—unemployment, that is—in the economy at a time when he says that recession is imminent throughout the Western world. This must be so if he is planning for a growth output of 2 per cent. I think that it is likely to be much lower than that—when the underlying growth in our capacity to produce is considerably more—and by at least 1 per cent. So will he be more explicit? This is the implication that I see and I should like to know whether it is accepted by the Treasury Bench.
Second, the Budget is once again—I am not necessarily saying that this is wrong, but the Chancellor should explain it to the people more clearly—adding directly to prices, about 1½ per cent. to retail prices directly, with perhaps another 1½ per cent. to come when the price adjustments of the nationalised industries have worked through. I am not necessarily criticising him for that. I am criticising him for not making it clearer. If I am wrong, I shall be grateful if hon. Members would put me right.
But even in his attempts to be explicit in his Budget speech, the right hon. Gentleman has told us only half the truth. He refrained, as my right hon. Friend the Member for Finchley (Mrs. Thatcher) said, from giving any idea of where and how the public expenditure reductions would fall. He told us that he was assuming an annual rate of growth in public expenditure of 2¾ per cent. That seems wholly inconsistent with his planned rate of growth of the economy as a whole of 2 per cent. and indeed with the other measures that he has put forward.
He has, it is true, laid considerable burdens on the personal section of the private sector, but those burdens have been on the productive part of the personal section and they have been matched by reliefs through pension increases and other social security benefits for the unproductive side of the personal section. That is fine, and it may be perfectly adequate, but it means that the whole personal section is in no way contributing to slackening the squeeze on the corporate sector.
This balance in the personal sector should require a considerable decrease in the growth in public expenditure, so that it is less, not more, than the planned output of 2 per cent. per year. The right hon. Gentleman has fudged the issue here. He has not made it clear from which of the three sectors the flow of funds will come to enable us to have more liquidity and more investment in industry.
There is an older saying than Hamlet's about conscience. It is that a guilty conscience never feels secure. I hope that the Chancellor of the Exchequer and the Paymaster-General both feel insecure, because they both should have a guilty conscience about the extent to which the problems that they are seeking to resolve in the Budget have been brought upon us by the previous policies of the Government, and particularly by the March Budget, which did so much to damage profitability and conscience in industry and to produce such grave problems in company liquidity.
These present measures seek to restore the situation, but, as my right hon. Friend said today, they show a lamentable lack of foresight by the Government, because at the time they were warned in some detail. They were told that the measures in the March Budget would in 1974


reduce company liquidity by between £1,000 million and £1,200 million. I made that point myself at a Financial Times conference, at which the Chief Secretary took a far more blithe view.
Last night, the Paymaster-General, referring to the £1,600 million which was being added to liquidity, said that it was completely out of scale with any ideas of the measures which were taken last March. That is not so. On 21st May, in an intervention, I said at the time:
If the flow of funds to the public and overseas sectors together is as the Government say it is, that will produce a flow of funds away from the third sector of the economy, the private sector, which could result in a deficit of £1,300 million to £1,500 million for industrial and commercial companies."—[OFFICIAL REPORT, 21st May 1974; Vol. 874, c. 234.]
So he has no excuse for not knowing that about£1,600 million—I was £100 million short of his figure—was likely to be the result of the March measures, because we told him so.
As for the productivity deduction, the right hon. Gentleman called it the Doomsday machine which was the source of all our evils. But he could have done something about it in March. It was there then. Indeed, in the same Financial Times conference, I pointed out that an extra £200 million-odd was likely to be taken off company liquidity, and not only by the operation of the threshold agreements but by the sort of doubling effect upon the productivity deduction when the threshold agreements were triggered, and suggested that this was something that the Government should consider.
So the right hon. Gentleman has no reason to blame Mr. Barber or any of the then Treasury Bench. The circumstances are different now, it is true, but they were, as we said then, different in March. There is no cause for him to seek to blame us for the sins of omission and commission of his right hon. Friend the Chancellor in his March Budget.
It is the Chancellor's failure and that of the Government to recognise this which has led them to relieve the pressure on private employers in this curiously oblique way which so many of my hon. Friends have criticised and not to give help where it is perhaps needed more than anywhere to the small businesses which

are affected by the cash squeeze. If the capital transfer tax goes through in its present form without the exemption of small businesses, then they can seek much the same piece of rope as that quoted by the Chancellor of the Duchy. There will be nothing left for them to do except to hang themselves in despair.
I turn to the immense borrowing requirement which is contained in the Budget.

Mr. Lever: It is so long since I have been in the Treasury that I may have forgotten, but will the right hon. Gentleman say why the rope will now be required for small businesses in the transfer tax, as there is a big concession in the passing of shares from husband to wife, which will take place now? Why have circumstances become worse because of the transfer tax compared with what they were previously concerning estate duty?

Mr. Macmillan: There is no relief, as there was with estate duty. There is an alternative, I agree. Those who are wishing to start small businesses can take a new decision. They can say "We can do what the Government want. We shall not have thrift or foresight and we shall not seek to build for the future. We shall be content to get up to whatever activity we can, to get as rich as quick as we can and to spend our money as fast as we can." If the right hon. Gentleman is trying to create a spiv's paradise for small enterprises, I can think of nothing better than this, which will discourage continuing thrift.

Mr. Lever: Surely the right hon. Gentleman will try to answer my point and not just declaim. Will he assist me in the way that I asked? How has the position deteriorated for the small business transfer on death compared with what it used to be? I should have thought that it was improved, but I may have forgotten the details.

Mr. Macmillan: This is partly a question of transfer inter vivos and partly the savage effect of capital gains tax, particularly in a highly inflationary situation. It is also partly because of mounting increases in the tax and the penal rates of marginal tax on savings income. All these have combined together, and the new provision of the capital transfer tax will not take any


account of any of these other measures. That is a point which no doubt we shall argue at great length and in considerable detail in the next few weeks.

Mr. John Tomlinson: Will the right hon. Gentleman give way?

Mr. Macmillan: No. We shall have plenty of opportunity for discussing this matter later.
I want to turn to the borrowing requirement. This is financed from the overseas sector. I accept that that does not increase the money supply. The Government have said that it is not inflationary. Unless my sums have gone very wrong, if it is not inflationary it must be leading to more unemployment, as I said it is at the beginning of my speech. If it is not leading to unemployment, financing it in this way must surely be inflationary. Perhaps those more expert in these matters will take up this point later in the debate. My hon. Friend the Member for Blaby (Mr. Lawson) put the point about the fear of and, indeed, the possibilities of unemployment as part of the anti-inflationary package with a great deal more clarity and courage than right hon. and hon. Members on the Government side of the House. However, I want to look briefly at the effect of this overseas borrowing.
This November there was nearly £3,000 million extra over the March estimate of the financial deficit of the public sector. The Budget adds another £725 million to this financial deficit, making an increase since the March estimate of £3,666 million. That is a total of £4,826 million. Of this, about £2,500 million comes from the greater cost of energy to industry. In so far as it goes to financing the public sector deficit, it is therefore, almost as though industry were being taxed to the extent of £2,500 million to finance a public sector deficit. For the rest, and for that, the Chancellor is relying on £5,000 million of borrowing from what he called the petro-dollars from the oil countries. As far as I can see, that means something over £1,000 million being apparently put to hot, short-term money in the City.
What are the safeguards that the Chancellor has got? What are the arrangements he has made, particularly now that the sterling guarantees have been

removed, to ensure that in the future we are not at risk? As far as I can see, the risk in financing the public sector deficit in this way over the longer term is very considerable.
The Chancellor showed a deplorable lack of urgency in considering this matter and the whole of the petro-dollar problem. He said in his speech that he had spent a lot of time discussing it with his colleagues from other countries and that
until collectively we come to terms with the challenge it presents, there is grave risk that we shall once again be plunged into a depression on a scale as great as we encountered over 40 years ago."—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 245]
But it does not seem that the Chancellor is dealing with this problem with the sense of urgency that the risk requires. That was the point made by my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) when he pointed out that it did not require just a conference but rather what he called "an amicable confrontation."
As far as I can see, little has been done since the action taken by my right hon. Friend the Leader of the Opposition when he was Prime Minister. Despite the words of the Chancellor of the Duchy when he opened the debate, it was he who took the lead in trying to get a European response to the Kissinger initiative on these matters and the work initiated by Mr. Barber when he was Chancellor of the Exchequer. There seems to be little that has been done either to reach some agreement or to try to use the position of the United Kingdom as a present oil consumer and future oil producer to get a degree of stability into not only energy matters but also commodity prices and supply.
When I was Paymaster-General some time ago we had taken discussions a long way. That was nearly a year ago. But where have they gone since then? Where have we gone in discussing with the oil producers and our European partners the question of investment in their own countries and development in the Arab countries, which now cannot consume goods because of shortages of population, lack of irrigation and so on? Where have we gone in discussing the development there of a broader industrial base and the development of agriculture


in the Third World, which must rely almost wholly on Arab money?
At Question Time today I heard that we are to have a debate on aid. But aid has no reality because we do not have the money to give aid. All that we can do is to join with our European partners in trying to channel some of the Arab surpluses to help some of the developing countries. What are we doing to channel these petro-dollars into these purposes and for longer-term investment, perhaps by a European institution?
There is a great lack of urgency here. In the whole of the Chancellor's Budget speech, and the speeches made by his colleagues, there has been no real attempt to bring home in the United Kingdom a sense of the dangers which confront us. There is the danger of depending on Arab money to keep control of our money supply—control which was initiated in the measures of 17th December 1973 by Mr. Barber. There are the dangers inherent in the enormous debt which is likely to arise overseas if we do succeed in keeping control of our money supply by keeping the Arab money, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out last night.
I do not think that we have had any sense of urgency as to what is required from the people of this country and of this Parliament. We do not contemplate enough the dangers of devaluation and the value of the pound. The Chancellor of the Duchy referred to the coming recession—the admitted recession—in the United States. The dollar premium is still at over 50 per cent. so that those who can get them would rather hold dollars in the United States in a recession than they would hold pounds in the United Kingdom now.
We cannot expect the Budget to solve these problems. We can, however, as one hon. Member said, expect it to state the parameters and to give the fullest possible detail of the actions the Government are likely to take. The Chancellor has failed to do that. His March Budget was a wholly political instrument. This one is perhaps half political, full of half truths with half his policies still concealed. My right hon. and hon. Friends and I may have to accept that this half

a loaf is better than no bread at all, but I believe that the Chancellor stands condemned not only for what he has done in the past but for that which he has left unsaid and undone in this Budget.

5.51 p.m.

Mr. Robin Corbett: Thank you for enabling me to make my maiden speech on a busy and important day, Mr. Speaker.
I hope that the right hon. Member for Farnham (Mr. Macmillan) will forgive me if I do not take up the points he was making. My predecessor served the House and the constituency for 15 years and it is right that I should pay tribute to that. There is a tradition in the constituency of long serving Members of Parliament, and that is one I hope I shall continue.
The constituency of Hemel Hempstead is 25 miles north of London and takes its name from the new town, but it includes the towns of Berkhampstead and Tring and several large villages. These have a tradition of independence that one quickly learns to respect, and it is right that this should be so. The new town is pleasant, well-planned and thriving, but it is one of the few remaining areas which yet retains a latter-day feudal baron in the shape of the Commission for the New Towns. The development corporation and, from 1962, the commission did a good job in developing Hemel Hempstead and expanding the town, especially in the provision of good quality housing and schools, but it has outstayed its welcome.
It is a feudal body because it is unelected and undemocratic, and it is unresponsive to local opinion as expressed in local elections. Councils come and go but the commission seemingly goes on for ever. It surely cannot be right 27 years after development first began that the Commission for the New Towns should still sit as unelected landlord of 10,000 homes, about 3,000 more than are owned by the local authority.
This is surely a travesty of local democracy, and my right hon. Friends with responsibilities for these matters should know that I have been sent here to help to untie these chains as speedily as possible, with housing and housing allocation handed over to the elected local council as a first step.
It was, indeed, the intention of the New Towns Act 1946 that this should happen. The commision admit that it now owns no major areas of land which are available for housing, and therefore there can be no reasonable remaining arguments to justify the continued occupancy by the commission of an area of responsibility which rightly belongs to the elected local authority.
There is much talk in this House of devolution to Cardiff and Edinburgh. My constituents in the new town are more concerned about devolution from the Commission for the New Towns to the Dacorum District Council because democracy begins on people's front doorsteps. I can give two instances of the lack of responsiveness by the commission. Earlier this year the Dacorum District Council decided to put all its tenancies into the joint names of husband and wife. When the commission was invited to do this it dithered and dallied and when pressed in effect said "I will have to ask my dad in London".
Last year, behind the back of the locally-elected council, the commission, seemingly on instructions from London, put up for auction older homes which it said it no longer required. It did so without any consultation with the local authority and with apparently little thought for the 4,000 people in the local authority's waiting list.
These are some of the reasons why the transfer of housing and housing allocation is so important, and why it should contain adequate safeguards for the existing staff of the commission. This transfer would let in democracy and would help to streamline administration. It might reduce costs by avoiding duplication between the commission and the council.
There is one other local matter to which I must refer. We urgently need a new district hospital. It has been talked about for 10 years and it is now time the talking stopped and the bricks and mortar were laid. Our existing hospital is inadequate and out of date for a new town, especially in its facilities for elderly patients who are housed in so-called temporary buildings which were put up 30 years ago. No amount of care, concern or compassion from staff at all levels—and these are provided—can make up for the had conditions in which patients are ex-

pected to get well and staff to work. There is an urgency about this.
I now turn to the debate. My right hon. Friend the Chancellor of his statement called us to a war on waste. I applaud that, but many of my constituents are already engaged in a war on waste because they are in low-paid jobs, because they are widows, single parents, pensioners or disabled. They have long been experts in the war on waste and out of sheer necessity. It is we here and others like us who are the lucky ones because we have a standard of living which gives us some choice about what we would like to cut. Our concern must must be with those families who have no such choice. It is on how we collectively attend to these needs in a crisis that all of us deserve to be judged.
For this reason I hope that my right hon. Friend will consider extending family allowances to the first child of single-parent families as a first step along this road by no later than next April.
For this reason I hope that the Chancellor will find ways of putting urgently needed extra money into public transport as a means of reducing oil imports, because in large parts of my constituency the bus service is non-existent. The only way to get to work and to shop is by car.
The disabled, too, need special help. I was this morning with a man who is a polio victim, living through a respirator and the help of a caring and devoted wife. His concern is that his small income, now regarded for tax purposes as unearned, although he cannot work, will be taxed under the Chancellor's proposals. Surely our crisis is not of a size which means that we must pick the pockets of the disabled. I hope, too, that thought will urgently be given to what this man, and others like him, will have to pay for the petrol that is needed for his wife to drive a specially converted van to take him out and about, and for the petrol he needs to fuel such things as his life-giving respirator.
In a big crisis it is small issues of that kind that give a Government the hall mark of compassion. In all our debates this week on the big issues of investment and resources we must not overlook the most important resource of all—people. One of our problems


is that we allow an enormous waste of the human resource, by too seldom encouraging or enabling people at work to play a full part in what is going on. We must assert our belief that we shall overcome our crisis not mainly via institutions—and not for people—but with and through people.

6.0 p.m.

Mr. John Pardoe: It is a great pleasure for me to congratulate the hon. Member for Hemel Hempstead (Mr. Corbett) on his splendidly robust and compassionate speech. His description of the Commission for the New Towns put me in mind of the Duchy of Cornwall. It seems almost exactly the same as that feudal authority under which some of my constituents labour. On the basis of the hon. Gentleman's speech, we look forward to further contributions of a similarly robust nature.
The Chancellor of the Duchy of Lancaster did not pull his punches in his description of the economic crisis facing us and the world as a whole. He looked to the dangers of world slump, and spoke again of the need for international co-operation. We have heard him on the subject before, and we all support his endeavours to get far more international co-operation to deal with the international nature of the crisis. In view of the right hon. Gentleman's remarks and my own feelings about the nature of the world economic crisis, I think that this is no time for any of us to consider leaving that one international organisation, the EEC, which can perhaps develop some kind of cohesion to deal with the problems we face. We are certainly not likely to deal with them on our own. Nevertheless, some of the problems we face can be solved here in our island by our own action, and it is at some of these problems that I want to look briefly.
I accept that the Government's domestic inheritance was appalling. When we look at the borrowing requirement, the public sector deficit, the subsidies for nationalised industries, the rate of inflation, or what happened to social unity under the Conservative Government, we see that that Government made matters worse. None of the long-term problems of Britain's economy, of which the

Leader of the Opposition was certainly aware before he came to power, were made any better by that Government.
I was amazed by the speech of the right hon. Member for Finchley (Mrs. Thatcher). One would never think from that speech that the Conservative Government had had any borrowing requirement. One would think that they had balanced the books completely on the domestic scene and on the international front. In fact, they increased the borrowing requirement recklessly and dangerously, and they were warned at every stage that they were doing so.
Listening to the right hon. Lady's speech, one might have been forgiven for wondering whether the Conservative Government had ever subsidised nationalised industries. They did so to a ruinous extent. Conservative Members, including the right hon. Lady, might read the OFFICIAL REPORT Of our debate on Second Reading of the Statutory Corporations (Financial Provisions) Bill on 21st November last year. Not one Conservative Member, not even a single rebel, could be found to join my right hon. and hon. Friends and me in the Lobby to oppose the ruinous nature of that Bill, which contained provisions not only to pay for the past subsidies to nationalised industries but to allow them to continue to make massive losses.
It might have been thought from the right hon. Lady's speech that at the last election the Conservative Party stood firm for a statutory incomes policy. It did no such thing. What penalties is the right hon. Lady talking of imposing on nationalised industries that break the social contract guidelines? I did not know that any such penalties were threatened by the Conservative Party at the last election. They were certainly not in its manifesto. And who set up the price controls and the attendant bureaucracy if it was not the Conservative Government?
Before I deal with the Chancellor's Budget strategy, I want to speak about three of the motions on which there are likely to be votes. The first is No. 15, concerning the repayment of tax to trade unions. I shall not rehearse the arguments on the matter, because they have been rehearsed ad nauseam. We regard the motion as retrospective legislation, to


which we are opposed in principle. It will be said that it is retrospective legislation in favour of the taxpayer. But it is also to the disadvantage of large numbers of other taxpayers, who will foot the bill. Therefore, there is a balance of advantage to be drawn up as between one group of taxpayers—quite a small group—and the much larger majority of taxpayers. Are we entitled to use public money to put right a problem that the trade union leaders could have avoided? I believe that we are not. We shall continue to oppose the Government on this measure.
The second motion with which I wish to deal is that concerning the investment income surcharge. The figure of £2,000 was fixed by the House on the basis of an amendment in the names of myself and my right hon. and hon. Friends which I moved on 16th July this year. I shall not repeat the arguments set out in HANSARD of that date, beginning at col. 39. I believe that they are still valid. The Government should be considering the motion in the light of what they propose for the taxation of wealth as a whole, because the wealth tax affects the issue.
I welcome the fact that there is to be a Select Committee on the wealth tax. I hope that I may be called upon to be a member. We are favourably disposed towards the idea of a wealth tax. We do not throw it out root and branch, but if it is effective it can replace almost all other forms of capital taxation. If it is an efficient revenue-raiser, an efficient distributor of wealth, it can incorporate the income surcharge. If we can do it efficiently, it is far better to tax wealth, particularly second-generation wealth, than to tax income.
The third motion with which I want to deal concerns the increase in VAT on petrol. I welcome the Chancellor's energy conservation proposals. He and I had something of an up-and-downer on television during the election campaign on the Government's failure to conserve energy and the enormous sums they were having to borrow to finance our energy imports. Last month's trade deficit of £440 million included £330 million for petroleum and petroleum products. Oil is clearly an immensly important factor in our whole balance of payments situation.
My first question to the Government is this: will the petrol tax cut consumption? The Government have not argued that it will, and they did not argue it the last time the tax was increased, but that is certainly the aim I want to see first and foremost in their mind. Has the tax cut consumption? Immediately after the energy crisis in October 1973, when the price of petrol increased significantly—four-star petrol cost about 36p a gallon in those halcyon days—petrol consumption in this country fell by between 5 per cent. and 6 per cent. Despite the fact that prices continued to rise at various stages, either by tax or other factors, the actual level of consumption is now about 2 per cent. below what it was before the energy crisis. That is not a substantial saving.
What studies have the Government undertaken? The Rand Corporation undertook, on behalf of the United States Government, some detailed calculations as to how an increase in the price of petrol might cut consumption. I do not suggest that the American scene is similar to that in Britain for there is far greater waste of petrol in the United States than there is here largely because of their general use of much larger motor cars.
How much of our oil imports is taken up by petrol? I believe the figure is only 8 per cent. Therefore, even if we could cut it by half, we would cut our total oil imports by only 4 per cent.—not a great deal. If the tax rise will not cut consumption, is it for other reasons acceptable? I do not believe that it is.
The Government are saying that the price rise for four-star petrol will amount to 8½p per gallon. I have searched, but I have been unable to find any Government statement of what they expect other forces to do to the price of petrol in the next few months. It seems likely that when the November crude oil increase is taken into account, the oil companies will have made a case for at least 2p a gallon, and possibly as much as 4p a gallon. If the Government then want to put the whole crude oil increase on to petrol rather than 'on to industrial oils, we could face an increase in the price of petrol, over and above the price of 8½p, of between 7p and 10p before Christmas. That would be a substantial increase if the two are to be joined


together and the Government must convince us that it will cut total consumption of petrol.
In the rural areas the problem is considerable because there is no rural transport. The great majority of my constituents have less public transport connections between villages and towns than their fathers and grandfathers enjoyed one hundred years ago. We know that local authorities still face a tight squeeze on their expenditure programmes. They can only squeeze in those parts of the programmes which they are not statutorily obliged to carry out. The subsidy to rural buses is one of those parts. It is highly likely that for that reason rural buses will be cut. Therefore, in the rural areas we can look forward to fewer bus services rather than more in the next few years.
As for incentives to work, the gap between take-home pay and supplementary benefit in Cornwall, Wales and Scotland and some regions of England is already very narrow and will be narrowed even further by reason of the tax and the increase in petrol prices which is to come.
How are Members of Parliament to answer questions put to them on this topic by constituents? Only last week one of my constituents told me that when he worked out the cost of driving 20 miles to the place to which he had to travel to obtain work he was virtually no better off than if he were not working at all. It is a difficult question for one to answer. I know what answer I should give to such a person in mathematical and accountancy terms, but it is hardly the sort of moral advice I want to give. We should certainly take into account the disincentive effect of the tax for such people.
If the increase in petrol prices will not cut the consumption of petrol very much there are perhaps other ways to cut consumption. We might subsume the road fund tax in a petrol tax but bring in an extra tax on cars with larger engines. This would have to be done over a three or four-year period so as not to wreck the whole pattern of production in the British motor industry. I am thinking of a figure of about £200 on cars with larger engines.
In the developing areas the Government, if they want to go ahead with the petrol tax, could do one of two things.

They could either allow firms to pass on at least part of the regional employment premium to their employees as a getting-to-work grant tax free, or alternatively they could allow those employees to claim the cost of getting to work as a tax-free allowance, which they would then have to justify to the Inland Revenue. Although the people in industrial areas have to drive to work, as do people in rural areas, it is in the rural areas where they have no alternative. Furthermore, it is in the rural areas, and particularly in the development areas, where the gap between take-home pay and supplementary benefit is narrow enough to have to worry about the effect of petrol price on the work incentive.
The Chancellor's strategy can be summed up in words he himself uttered in his speech. He said:
Moreover, if wages rise beyond the limits set by the TUC, the Government will be compelled to take offsetting steps to curtail demand. And the effects on the financial position of the company sector are bound to lead to unemployment, as Mr. Jack Jones pointed out in a powerful speech the other day."—[OFFICIAL REPORT, 12th November 1974: Vol. 881, c. 249.]
This is the second time in ten years that a Labour Government have espoused unemployment as an instrument of economic policy. On this basis the Government have no alternative to higher unemployment because they reject the only alternative strategy—namely, direct action effectively to curb excessive income increases.
I believe the alternative strategy which the Government should adopt is as follows: first, we must change the wage determination basis. We do not do that by putting trade union leaders in gaol. The incredible thing is that the 1966–70 Labour Government and the 1970–74 Conservative Government decided that they wanted to change the wage determination basis and reform the trade unions and industrial relations. They said to themselves, "Where can we find a country whose industrial relations are worse than ours and which loses more working days per 1,000 employees than we do?" Their answer was the United States, so they said, "Let us go to the United States and import their legislation here." And that is what they did.
My hon. Friends and I, however, have asked a rather different question: "Where


can we find a country that does not suffer from these appalling industrial relations and from this extraordinary monopoly power which rigs the whole wage determination process? "The answer is West Germany. Therefore, let us import some of the German industrial democratic legislation here. That is the basis of our industrial partnership. It includes co-ownership and profit sharing because it will make profits desirable and will persuade people to forgo present earnings to create investment to enable profits to be made in future. They will do that only if they know they will have a share in those future profits.
We do not accept the Labour Government's extraordinary version of industrial democracy which is to extend the power of the trade unions—some of the least democratic bodies of all—by means of industrial partnership.
The second part of the strategy is the programme of indexation. I do not believe that we can fight inflation without it, and here I am in agreement with Professor Friedman. We have to take the pain out of reducing the rate of inflation by monetary correction. This was one of the reasons that we tabled an amendment to the last Finance Bill on the question of inflation accounting. I am glad that the Government have gone some way in that direction, but they have gone nothing like as far as we would like.
Thirdly, we have to bring in a programme of protection for the lower paid. I wish to take up the line of argument followed by the hon. Member for Hemel Hempstead. He and I share views on family allowances. Over the years we have been arguing from the Liberal benches that we should combine the money which is now spent on child tax allowances and that spent on family allowances and pay it all out in family allowances including the first child. It is utterly ludicrous that the money I obtain for each of my three children from the tax allowance is far greater than the money many of my constituents, who are paid well below national average earnings, get for the second or third or subsequent child through the family allowance. That is a disgrace.
I hope that the Government will look again at the whole question of a tax credit scheme because it would be a

development of this rather simple reform and would enable us to do it on a much more comprehensive scale.
The Government want an effective prices and incomes policy. We want it. We believe that an effective prices and incomes policy is the price we have to pay for full employment. The Government now accept that to make the social contract effective sanctions are required, so they are proposing to use price controls to enforce pay controls. This is a similar system to the "Serisette" suggested in France and similar to the Liberal Party's proposal for a tax on inflation.
The purpose is to stiffen the resistance of employers to pay claims. But is it possible to do so? Many employers cannot have their resistance stiffened because they cannot afford to resist. They are so capital-intensive that they simply have to keep their equipment working and therefore will pay their employees almost anything they ask.
The only way to deal with this problem is, in our view, to impose a tax on those who cause inflation—a tax on those who beat the social contract and are, as the Secretary of State for Education and Science said in a telling phrase the other day, "cheats". What do we do about the cheats? We should tax them. The tax would be a deterrent and would work completely only if it resulted in no revenue.
I do not condemn the social contract. I hope that it will work. Nothing would please me better if it did. But I believe, as the Government now really believe, that some enforcement will be required. What if the social contract does not work? We shall have rising unemployment on a massive scale, and we had better prepare for it.
For that reason, I join the Chancellor of the Exchequer in being somewhat puzzled by the present unemployment figures. We need to know how much of it really is unemployment—how many people are in the queue for work—and remove the rest from our calculations of demand management. We should not remove them from our compassion or social care, but for the better management of the economy we need an investigation to solve the puzzle of unemployment which the Chancellor spelled out.

Orders of the Day — ROYAL ASSENT

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Act:
Pensioners' Payments Act 1974.

Orders of the Day — BUDGET RESOLUTIONS AND ECONOMIC SITUATION

Question again proposed.

6.25 p.m.

Mr. David Stoddart: I begin by congratulating my hon. Friend the Member for Hemel Hempstead (Mr. Corbett) on an admirable speech. I sincerely trust that he will follow the tradition of Hemel Hempstead by being a very long-serving Member. He recalled that his is a new town which has the feudal baron of the New Towns Corporation. As he probably knows, he and I have something in common because Swindon, although not a new town, is an expanding town.
The experience which Hemel Hempstead has had and which my hon. Friend has so ably described will confirm the wisdom of those in Swindon who insisted on getting control of their own expansion and not handing it over to someone else. I shall send copies of my hon. Friend's speech to people in Swindon so that they know that they did the right thing. His speech was moving, forthright and knowledgeable. We all enjoyed it and I sincerely hope that we shall hear much more of him in the future.
I agree with the hon. Member for Cornwall, North (Mr. Pardoe) in his condemnation of the Conservative Party. Certainly Conservative Members have short memories, thick skins and all the cheek of old Nick. They were in office only eight months ago yet they now have the nerve to criticise my right hon. Friend the Chancellor of the Exchequer and the Labour Party for not solving all our economic difficulties and being able to overturn the Conservative Government's absurd economic policy within eight months. It is a truly hypocritical attitude. The extent of the hypocrisy was shown by the right hon. Member for Carshalton (Mr. Carr) in his speech to the House

Yesterday and in his television broadcast last night.
For example, the right hon. Gentleman said that during the summer the Conservatives had pressed for a measure to extend tax relief for all old-age pensioners—that is, instead of the age exemption limit. That claim of his is remarkable because I made the same proposal to Mr. Anthony Barber, who has now scampered off to the City, leaving the present Government to clear up the mess. He turned the suggestion down on the ground that the Treasury could not afford it and that it would be socially inequitable. At the same time Mr. Barber was handing out big tax reliefs to surtax payers.
Nothing can be more hypocritical than to say when one is in Government "We cannot do it because we cannot afford it and it would be unfair" and then press the same proposal on the next Government when one has been in opposition for only about three months. That is the sort of thing that brings politics and politicians into disrepute. I hope that we shall have a better display of memory from the Conservative Party in the months ahead.
I now address myself to my right hon. Friend the Chancellor of the Exchequer I understand that in the present circumstances the Budget is a reasonable one, and that he has probably done what is necessary at this stage—with, that is, the instruments he has to hand. But I have to say to him that many of us will expect the Government quickly to bring forward new proposals for new instruments that we in Parliament can forge for them so that Government help to industry can be more selective and more related to the over-riding national interest than to the particular industry interest.
The social contract has been much derided and spat upon by the Conservative Party, unjustly, unfairly and, I believe, to the detriment of the country. I thought my right hon. Friend's broadcast was excellent. I heard his strictures to trade unionists, when he said that it was easy enough to use the bludgeon and to strike to get what one wanted.
But the Government must not expect the social contract to work overnight. I want them to remember that over a period of years the working people have


been set by the Conservative Party an example of market forces. It has been a bad example. It has taught them that if they brandish their fists and use the bludgeon they will get what they want. They have been taught jungle economics by Conservative Members. We can hardly blame working people, when they see land speculators and others using a shortage situation to push up the price of houses beyond the reach of the majority, for doing exactly the same to their employers in a similar situation. That is the market economy that they were taught by Conservative Members. I tell my right hon. Friend not to expect that example to be overturned overnight.
What we now need and what we are getting from the Government is a new lead, a new concept of how the country is to be run. We are being shown a new concept of how people can work together rather than compete against each other. I believe that over a period the working people, who are decent people with sound common sense, will respond to such leadership and that we shall have wage settlements related to what the country can afford and to what employers can afford to pay.
I now turn to energy. I agree with the hon. Member for Cornwall, North. I remind Conservative Members that it was they who started the nationalised industries on a downward path to financial ruin. I can remember speaking on the Statutory Corporations (Financial Provisions) Act and warning exactly what would happen. I can remember saying to my party that if we voted for the Bill we would be voting for disaster for the nationalised industries and giving Conservative Members a stick with which to beat the Labour Party during elections. We cannot in an energy shortage subsidise the waste of energy. That is precisely what we are doing, and unless the Chancellor acts as he says he will we shall continue to do so. It is nonsense to continue with such a policy.
In many instances we are wasting 90 per cent. of the subsidised heat value sent out of power stations and other installations. We should be thinking along the lines of subsidising energy conservation. I notice that in the industrial sector the Chancellor has done exactly that. We must not deny or try to hide

the fact that the additional bills for ordinary people will be very high. If we wish to conserve energy, we must transfer some of the money which will be saved into assisting people to conserve energy in their homes. At least 50 per cent. of British houses have no roof insulation and 30 per cent. of the heat introduced into them is lost through the roof. I urge my right hon. Friend to take action—for example, through the improvement grant system—to assist people to conserve energy in their homes.
My third point is that of getting additional production from industry. It is true, as the Chancellor recognised, that we need to move money into investment. We also need to move people back into industry. In last week's Sunday Times it was pointed out that there has been a 29 per cent. increase in the number of non-productive workers over the past 12 years. Whereas in 1962 there were 250,000 more productive workers than non-productive workers, we now find that there are 1,750,000 more non-productive workers than productive workers. When we go out to buy British goods in the shops it is little wonder that we are so often told that we shall have to wait, six, seven or eight weeks for delivery. Because we do not want to wait that long, we buy Japanese or German goods. That is one reason for my urging my right hon. Friend to consider introducing a measure that will act as an incentive for more employment in manufacturing industry or will act as a deterrent to more employment in service industries. That also applies to Government and local government service. They are important but they are the sectors in which the main increase in employment has taken place.
To a large degree that has happened because of the ridiculous reorganisation that took place under the last Conservative Government. We are entitled to expect efficiency from local authorities and Government Departments in exactly the same way as we expect efficiency from private industry. If we wish to achieve such efficiency, it may be that we should have consultations with the local authorities and relate manpower use to the rate support grant.
I am glad that my right hon. Friend did not give in to the whinings and groanings from the CBI to reduce corporation tax. The argument that is used


is that industry must have additional cash flow through lower taxation. That will not wash. In my constituency we have a firm by the name of Plessey. Last year it made a profit of £40 million. We are told by Conservative Members that firms need profits so that they can provide employment. Plessey made £40 million profit but over the past three months it has made redundant 1,200 workers in my constituency. There seems to be little relationship between profit and employment in the Plessey organisation. I hope that the Chancellor will continue to ignore the CBI until it can act in a responsible and pro-British manner.

Mr. Heseltine: I hope that the hon. Gentleman will at least warn his constituents that if they ignore the CBI more of them will be unemployed.

Mr. Stoddart: In fact, they will not be. That is incorrect. I should like to be able to advise the Government to take notice of the CBI. I shall be able to do so when it grows up and gets down to the real problems now facing us. When that happens, I am sure that everyone will take notice of the CBI. At the moment it is a body which should have no influence at all.
I wish the Budget well. I trust that the Government will come forward with further measures to enable us to get out of the real economic difficulties which were left with us by the last Conservative Government.

6.38 p.m.

Mr. Michael Alison: The hon. Member for Swindon (Mr. Stoddart) said that he would range fairly widely. He did so, and he touched on one subject that is the topic which I want to pick out from his speech and take up—namely, the social contract. I shall approach it by way of unemployment. It seems to me that unemployment is the most fascinating hidden factor in the Budget. I cannot quite make out whether it is the dog that did not bark or whether it is barking loudly. The fact is that the dog is there and that it is relevant to the social contract.
I draw the attention of the House and the hon. Member for Swindon to the significance of unemployment in the context of the social contract. I refer to a

key passage in the Chancellor's speech which I have trawled up rather like my right hon. Friend the Member for Finchley (Mrs. Thatcher) trawled up a significant passage. In the context of unemployment and the social contract, the right hon. Gentleman said:
Moreover, if wages rise beyond the limits set by the TUC, the Government will he compelled to take offsetting steps to curtail demand. And the effects on the financial position of the company sector are bound to lead to unemployment, as Mr. Jack Jones pointed out …".—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 249.]
I hope it will not be lost on the House that the factor of unemployment is, as it were, the guard dog of the social contract.
It is interesting to reflect on how prices and incomes policies have evolved in the last 10 years. The House will recall that they started with a system of voluntary prices and incomes policies which was tried and found wanting. We then moved over—both major parties and, I think, the Liberal Party too—to a statutory prices and incomes policy, and that was found wanting. Evidently the two major parties have now discarded statutory prices and incomes policies. So we have come to what is called the social contract.
The social contract is clearly not a statutory form of prices and incomes policy. I think that the hon. Member for Swindon and the Minister of State will follow me there. But I suspect that it is also clearly not a voluntary species of prices and incomes policy. One only has to refer to the guard dog factor of the Chancellor dangling unemployment as the coercive factor in the situation for it to become evident that it is not a voluntary form of prices and incomes policy.
Therefore, what we have come to is the abandonment of a prices and incomes policy and the return to the traditional, classical governmental rôle of managing the economy by managing the level of aggregate demand. It is evident that if unemployment is to be brought in as a governor, a sanction, in the management of the social contract, it is the same as saying that the Government are going to bring in the weapon of aggregate demand management to control the economy. In other words the Government have at a stroke, in the Chancellor's speech, destroyed the significance of the social contract.
This can be demonstrated by a very simple test and I hope I take the hon. Member for Swindon with me. Suppose that the social contract guideline is observed in terms of wage settlements in those areas where the social contract can be monitored. So far so good. The social contract has been observed. Everyone is happy—or are they? Suppose also that actual earnings due to wages drift or other unobserved factors or devices increase the level of incomes way beyond the social contract guidelines, but covertly, imperceptibly, unobserved and, therefore, unmonitored and unregulated, but nevertheless in such a way as to increase the real pressure on resources, the rate of inflation, the real movement of forces in the economy. Does it follow that, simply because overtly the social contract guideline has not been breached as far as anybody can see, the Chancellor will not have to act upon the level of aggregate demand? It is ludicrous to interpret his words which I quoted to mean that he will only act upon it if the social contract has been overtly breached but not if it has been covertly breached.
If, for whatever reason, real forces are unleashed in the economy in terms of wage drift or increasing inflationary pressures, it is clear from what the Chancellor has said, whether or not this is occurring within the terms of the social contract, that he is going to act by the traditional methods of regulating the level of aggregate demand.

Mr. Stoddart: One accepts that all Chancellors will try to regulate aggregate demand, but is the hon. Gentleman suggesting that wage drift does not exist when one has a statutory policy? Has he not had experience under previous statutory policies of wage drift taking place in exactly the same way—perhaps by a different means, but nevertheless a wage drift existed and it had its effect on the economy? Does not the hon. Gentleman agree that the social contract offers people a choice, and does he not think that that is a good thing for the Labour Party to try to do?

Mr. Alison: I do not think the hon. Gentleman has taken the point. My point is that in every form of statutory prices and incomes policy that we have had hitherto, because monitoring is so difficult, because the holes in the net are so

multiple, diffuse and diverse, leakages have occurred. Whatever the outward form of presentation of the guidelines, imperceptible pressures have arisen when aggregate demand has been at the wrong level. Imperceptible forces have operated: wage drift, false promotion, false job specification and other devices of a false nature to get round the social contract or the prices and incomes policy.
If the Chancellor says that he is going to act through regulating the level of demand, which is what he said in the speech from which I quoted, the relevance of the social contract—the relevance of an overt guideline—has entirely and permanently evaporated. He has made it clear that he is coming back to the traditional classical methods of managing demand in the economy. In this context the social contract has been entirely destroyed by his admission of his return to classical and traditional methods.
If my argument is accepted that the Chancellor has given a clear indication that he is going back to demand management as his key weapon in beating inflation, I ask the House to consider whether he has fully grasped the particular significance of one of the weapons of demand management to which he referred in his speech and which is mentioned in the Red Book. This is the factor of the growth of the money stock. This is profoundly relevant to the issue of unemployment and to the way in which the right hon. Gentleman manages the level of demand in the economy.
I want to refer the House to the simple clear statement in the Red Book—there is a comparable passage in the Chancellor's speech—where reference is made to the money stock. This is on page 5, paragraph 16:
During the early months of 1974 the growth in money stock on the broad definition decelerated sharply. It"—
the stock of money—
is now increasing at a rate well below the growth of gross domestic product in current prices.
I hope that Treasury Ministers appreciate the significance of the growth of the money stock increasing at a level well below the rate of growth of the gross domestic product. The significance is simple. One way of measuring and defin-


ing the gross domestic product is to multiply the stock of money by the velocity with which that stock of money turns over and, QED, the resulting product—the other side of the equation—is the gross domestic product.
If one of these factors on the left-hand side of the equation, the stock of money, is falling more rapidly than the gross domestic product, unless the velocity is moving in the other direction the chances are that the GDP must in due course, in current price terms, be dragged down. When we have two factors which are both tending to fall in relation to the GDP, the stock of money and the velocity factor—according to Economic Trends for October 1974, velocity is on a downward trend—it must follow that the GDP in current price terms will and must necessarily fall.
So the bald statement that the stock of money is now increasing at a rate well below the growth of GDP at current prices is an absolutely clear and inescapable indication of the direction of the movement of GDP. The first point to make in this connection is the simple one that there is a clear contradiction in the material provided in the Red Book. Whereas the monetary factors I have indicated must suggest a drop or deceleration in GDP, the forecasts in Table I on page 7 of the Red Book show exactly the opposite, namely, an acceleration in the rate of growth of GDP between 1973–75 as compared with 1973–74. One of the forecasts is wrong. There cannot be the monetary factors necessarily postulating a deceleration in the GDP and the forecast on some other basis indicating an acceleration in GDP.
Let us suppose that the figure of 1·5 per cent. growth for 1973–75 given in Table I is correct. This entails and implies an unemployment level of at least 1 million. This was the level of unemployment in 1971 when GDP was increasing at the rate of 1·5 a year. It is at least possible, with higher productivity since, that the same level of growth in 1973–75–1·5 per cent. a year—will imply over 1 million unemployed. If the monetary indicators pointing in exactly the reverse direction, not of growth but a drop in GDP, are to be believed—and I believe that they are the most potent and significant factors—we shall have a much

lower level of growth in the economy and a considerably larger level of unemployment, well above 1 million.
The Government must make up their mind as to whether they think GDP will grow with relative money stock and velocity falling, or whether it will drop. Whichever it is, the implications for employment are profoundly significant. Here we have the dog in this rather turgid plot of the Chancellor's speech which is extremely and potently present. I believe that it is there both to bark and to bite. The fact that it has been placed there to do this means that we have come to the end of a voluntary prices and incomes policy and "ear-stroking" and that we have returned to the traditional weapon of management of aggregate demand levels. It looks to me, even in this context, as if the Government do not quite know what they are doing and have probably over-killed.

6.54 p.m.

Mr. Alf Bates: I hope that the hon. Member for Barkston Ash (Mr. Alison) will not mind if, for the sake of brevity, I do not follow all the points he has raised. Many other speakers have mentioned the social contract. Instead I want to look at two points in the Chancellor's Statement. The first deals with the plans to help industry through Finance for Industry and alterations in the Price Code. I know that a number of my hon. Friends have attacked this method of attempting to help industry. They would prefer the Chancellor to use the proposed National Enterprise Board and the planning agreements system to give industry the required stimulus.
I hope that the NEB and the planning agreements system will be introduced quickly and will form a major part of the Government's strategy for industry. We shall not solve many of the fundamental ills or imbalances in our economy and in our industry until this is done. I cannot share the optimism of some of my hon. Friends and others—optimism often shown by the Chancellor of the Duchy of Lancaster—for a blanket and unselective approach to the problems of the economy. That is a view that has not caught up with the current situation.
I am afraid that some people occasionally seem to display a burst of pleasure


at having just discovered Keynes. I regret also that there are one or two hon. Members, particularly Tory Members, who so often seem to be pre-Keynsian, if not prehistoric.

Dr. Colin Phipps: Dickensian.

Mr. Bates: Despite that and despite the need for the NEB and the planning agreements system, the problems of industry are immediate. Industry requires help now and the tools of the NEB and the planning agreements are not yet available. There are people in my constituency who are on short-time working as a result of the problems in industry. They are being threatened with redundancy. They do not want to wait until we in this House have passed a new Industry Act giving the Chancellor more powers before there is an improvement in their industry. They want to see it now. That is why I believe the Chancellor was right to have taken the steps he has to assist industry.
We also have to examine some of the reasons for our plans for industry and for our industrial policy. These arise chiefly out of an understanding of the changing nature of industry, an understanding of the growing power that a few companies have developed in the past decade or two. It is an understanding that only the Labour Party has. The other parties have not yet come to terms with the situation. Because of the changing nature of many companies, because of an increased need for technology and a consequent need for a larger and stronger organisation—leading to a demand for greater capital investment and a longer period of gestation for that capital investment before products are forthcoming—there has been a move within industry towards concentration into fewer but larger companies.
That is the only way in which many companies are able to protect their investment over that longer period of time. This inevitable change is one of the reasons why our plans for a National Enterprise Board are right. It is inevitable that when companies require large capital programmes, lasting for a long period of time, they will begin to develop into organisations able to protect that capital investment. They need the ability to influence market patterns, prices and

the pattern of demand. That is why so many of the prehistoric theories put forward by some Tory Members are so wrong. We can no longer consider ourselves to be in a free market and thus adopt the rather out-dated theories that go with it.
Within large and medium-sized corn-panics with a technological basis there is often a need for direct Government help. Many large companies could not invest over a long period were it not for the Government's backing, and many medium-sized companies, because they do do have the security of being able to dominate their own market, cannot even survive without Government backing. That is why I believe our policies for a National Enterprise Board with planning agreements in these large firms are right.
With the new domination of a few companies over our economy it is important that we should have much stronger social control over that power. But, as a corollary to accepting that a few companies control about half our market, we have to accept that there remains a large area of medium and small industry employing a great many people. The changing pattern of industry which dictated accumulation into a number of large companies also dictated that some companies would be unable to do that. Where organisation is not fundamentally important to a company, where there is not an important technological base, where there are geographical problems or where there is a service or a function that is in the main a personal one, it is not always possible or desirable that the company should grow large.
We have to recognise that there is this large remaining area in our economy of small and medium-sized companies. Those are the companies that have been hit as hard as anybody by the present financial difficulties. Their inability to dominate their own markets has meant a harder time for them than for the large companies when cash flow is short, as it is now.
Typically, many of the smaller and medium-sized industries are service industries to the large conglomerations. When large industry begins to cut back on investment and on buying those smaller service industries will be affected much harder. As there are so many people


employed within those industries, and as such a large part of our output still is produced by them, we need also to create the right economic environment for them. But we did not intend the National Enterprise Board or the planning agreement system to operate on the scale of so many small and medium-sized companies. Therefore, something else had to be done. For that reason also the Chancellor was right to take the action he has taken through FFI and alterations in the Price Code. Whether the action is at the right level is open to question.
Economically, I do not have behind me as many advisers as has the Chancellor and, therefore, I conclude that he is more likely to be right than I am. Politically, as the plans have been attacked as totally inadequate by the CBI, and as a complete sell-out to the CBI by some of my hon. Friends. I also conclude that it is probably at about the right level.
I come to the public spending item. One reason for the imbalance in our society is that whenever we have faced any difficulty we have constantly cut back on public spending. We have used public spending as a reaction to economic events rather than planning public spending over a period and making more use of fiscal measures. We still have far too many schools in need of replacement or improvement. We still have far too many depressed areas lacking basic facilities. We still have far too few recreational facilities in our new and expanding towns, leading to a tremendous problem with young people. At the same time, there are still far too many areas of luxury spending. It is still a bit too easy to be able to buy a yacht. While the other areas are in such desperate need, that is something which we shall have to alter.
We cannot have a massive expansion in public spending at this time, but we must ask ourselves whether a level of 2¾ per cent. is enough. Many local authorities will need more than that simply to stand still. As many capital schemes have already been approved and cannot be cut back, what will happen is that most local authorities will start cutting back, for example, on the number of teachers they employ or on provision for the youth service. That would be short-sighted and tragic.
As to the attitude of the Opposition, we heard today from the right hon. Member for Finchley (Mrs. Thatcher) and yesterday from the the right hon. Member for Carshalton (Mr. Carr)—indeed, I unfortunately caught a brief glimpse of him on television. They suggest that this 2¾ per cent. is too much. On television the right hon. Gentlematn said that we should cut right back on Government spending and that next year there should be no increase at all.
However, he informed television viewers that we should give more for pensioners and the blind. That is because he knew that the blind were listening to him and many pensioners would be watching him. If he wants to give more to these people, although he believes that there should be no increase next year, exactly where will the cuts come? That question was asked of the right hon. Member for Finchley this afternoon, but she did not tell us. The Conservative attitude is a fraud.
I should not object to the Chancellor being bolder on this aspect of his Budget. I would not object to paying more for my pint of beer or my Christmas whisky in an attempt to allow local authorities to spend a little more next year on education, the youth service, and so on. The Chancellor could have been bolder here, and many of us will be watching for the precise details of the White Paper on public expenditure to ensure that essential services are not cut down.

7.9 p.m

Mr. Charles Fletcher-Cooke: I congratulate the Chancellor of the Exchequer, in his absence, on one thing he did not do in the Budget. It is something he must have been tempted to do and which he was under great pressure to do, but he resisted that temptation. He did not impose upon us varying rates of value added tax. Multi-rate VAT is one of the most appalling prospects that the country faces. The pressure upon the Chancellor is great because of the cry for selectivity, for clobbering the goods and services which are regarded as morally sinful, and to encourage those which are morally to be praised. This attitude runs deep in certain political quarters.
But the Chancellor has resisted that temptation with the single exception of petrol, which in any case is rather different. He will have the thanks of the


multitudinous traders and small businessmen who already spend much of their time filling up forms. If these people had to fill up VAT forms involving differential rates, they would be spending not only all their Sunday mornings but all their Sunday afternoons as well doing it. They already spend most of their Sundays on this work with only a uniform rate to contend with.
When we come to what the Chancellor did, we find that the craze for selectivity which is now fashionable, particularly below the Gangway on the Government side of the House, got the better of him. It got the better of him because he dared not do what he should have done, which was to have made a straight cut in corporation tax and a simplification of the Price Code. That would have caused a much greater spurt and injection of hope and confidence than will the complicated method in which he has distributed money towards helping small and medium sized businesses.
With regard to the Price Code, the joy with which small manufacturing firms must have greeted the Chancellor's speech must have been modified when they read about the productivity deduction. The complications of this are such that not only will Sunday afternoons have to be spent in working out what people are likely to get, but it will also be a long time before they get anything at all.
The Chancellor stated that in firms where labour costs are between 15 per cent. and 35 per cent. of total costs, the productivity deduction
will be subject to the 20 per cent. rate, but a firm with 80 per cent. labour costs will be subject only to a 9 per cent. rate while for one with 5 per cent. labour costs the rate will be 35 per cent.
Those are only examples. There is a sliding scale in both directions, and it is such that it will be weeks and even months before accountants on both sides of the barricade have got the matter sorted out and know what the position is. That is a relaxation of the Price Code that is supposed to bring tremendous and immediate psychological uplift to firms with desperate cash flow problems.
Another example of the operation of this fashionable selectivity can be found in corporation tax. What the Chancellor had to say about this was such that even

HANSARD recorded that the House dissolved into laughter. The Chancellor said:
I therefore propose that for tax purposes companies should have the right to reduce the closing valuation of their stocks and work in progress for the accounting period which ended in the financial year 1973–74—on which their current tax bills are based—by an amount by which the increase in the book value of stocks and work in progress exceeds 10 per cent. of the trading profits of the business in the same accounting year.—[OFFICIAL REPORT, 12th November 1974; Vol. 881, cols. 262 and 264.]
That was followed by "[Laughter.]".
Why was there laughter? There was laughter because everybody knows—even the large firms to which this applies—that it does not apply to the small or medium-size firms, and that it will take at least six months for firms to find out where they stand. What sort of boost and hope of confidence will that produce?
Small and medium-size businesses have no cash flow to fall back on. Their bank accommodation has been exhausted and they are in desperate straits. The good intentions which the Chancellor has towards them will not be felt in six months, or even in a year or two years, despite what he promises. They get nothing this year because of the magic figure of £25,000 minimum for closing stock. At the moment these businesses want help, hope and confidence. They do not want complicated rules or sliding scales by which they may get something back, after immense arguments, in about two years' time.
It is a thousand pities that the Chancellor's good intentions have been ruined and have been sacrificed on the altar of selectivity, the principles of which are very strange but which appear to be the only weapon at present available to the Chancellor. Straight reductions across the board would have been easy to administer, to understand and to work, but they are ruled out because of the dogmatic objections of the Chancellor's hon. Friends below the Gangway.

7.16 p.m.

Dr. Colin Phipps: I join with other hon. Members who have congratulated my hon. Friend the Member for Hemel Hempstead (Mr. Corbett) on his maiden speech. I have known him for some years, prior to his coming to


the House. I am glad that he has been able to display his qualities to us today. I look forward to hearing him in the future and I trust that he will retain his seat for many years.
I hope that the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) will forgive me if I do not follow his remarks, as I wish to refer in particular to three aspects of the statement by my right hon. Friend the Chancellor.
I turn first to the question of the recycling of the oil moneys, the so-called petro-dollars. I have been perturbed in recent months about the way in which some western developed countries have been gathering together to discuss ways in which they can recycle oil moneys. They have tended to neglect the essential problem of recycling, which involves the Arab countries, and they have tended to look at the matter as a way of getting us out of our difficulties.
I wish to draw attention in particular to the problems faced by the Arab countries. Hon. Members will recall that my profession is an oil consultant. In the past I have been a consultant to some of the Middle Eastern Governments. The central problem faced by Middle Eastern countries is that they know that their single asset, their oil reserves, will one day become exhausted. When that happens their income will also become exhausted. They therefore have to decide now what they must do with their present income in order to provide for themselves after the end of the present century, when their income will be greatly reduced.
Some of the countries, particularly Iran, have decided that the thing to do is to industrialise. The Shah has grand schemes for developing a petro-chemical industry in Iran, and a lot of the oil revenues will be used for that purpose. If a country does industrialise it will be in the position of having, when the oil runs out, fixed assets which it can use to generate income in the future. Countries like Saudi Arabia and Kuwait, which do not have the possibility of industrialisation, must choose another course. It has been suggested that they could make the desert bloom, but there is no logic in making the desert bloom or in

growing 10 dollar lettuces there when they can be imported for 10 cents.
Many of these countries find themselves in this sort of situation. They must find a secure home now for their revenues so that those revenues can continue to support them when their oil runs out. The obvious place in which to invest that money is the developed and developing economies.
However, I do not have to remind the House that the oil sheiks themselves are not unaware of the fact that countries can nationalise assets which are within their own borders. They have done it themselves. If they are to invest in our economies, they are only too well aware that we could easily nationalise the assets which their investments formed for us. So, above all when discussing with the Arab countries ways of recycling this oil income, what is needed is an absolute guarantee to them for the investment of that money so that the income from the investments will continue to accrue to them after their oil has disappeared.
I have to admit that were I today in the position of advising the Saudi Arabian Government I should have to say that, till such a guarantee should be available, the best that they could do would be to reduce production and to raise the price. No doubt hon. Members from Scotland envisage the day when they will be in this position themselves. No doubt much of the funds will be used, for a start, to rebuild Hadrian's Wall.
I commend those of my right hon. Friends who will join other countries in discussing the best way to recycle these oil moneys to think in terms of forming some kind of foolproof, copper-bottomed international bank which will guarantee to the oil-producing countries that the money that they invest will produce a guaranteed income for them in years to come. That is an essential first necessity before anyone can solve the problem of recycling this money.
I turn now to the local energy scene and that part of my right hon. Friend's Budget speech dealing with the progressive removal of subsidies from our nationalised industries, especially the electricity industry. This immediately struck me as a somewhat regressive move. The Chancellor of the Exchequer stood at the Dispatch Box and next to him was my


right hon. Friend the Secretary of State for Prices and Consumer Protection who has just been putting on subsidies, but my right hon. Friend the Chancellor was discussing the subsidies that he was about to remove.
Subsidies are a form of indirect help to the lower paid. In the past Labour Governments have always believed in this form of selective help. Because of the difficulty with respect to energy consumption I can see the case for the removal of subsidies from the nationalised industries which are involved in energy, but I suggest to my right hon. Friend that the weight which will fall upon the ordinary consumer it totally out of proportion to the weight which will fall upon other consumers.
The consumption of energy is a direct function of wealth. The wealthier the individual, the more energy he consumes. I suggest that perhaps the best way of tackling this problem is to turn the tariff system upside down. At the moment, conventional wisdom is that the tariff should be highest for the smallest consumer. This is based on two premises. The first is that it is more expensive to service a small consumer. The second is that if the tariff is decreased as more energy is consumed that will be an encouragement for people to use more energy. Today, we do not want to encourage the use of more, so I suggest that we turn the system upside down and make it cheaper for those who use small amounts and progressively more expensive the more is used. This would probably result in a greater saving of electricity than any proposal that my right hon. Friend currently has in mind. This is a socially just and elegant solution, and I commend it to my right hon. Friend.
Having dealt with the two matters affecting energy, I turn to the capital transfer tax. I want to make it clear at the outset that I welcome the tax wholeheartedly. It may be heretical to say so, but it has been some years since I believed that British Governments genuinely controlled the macro-economy of the country. The evidence of the past 20 years suggests that they may have moved round the edges but that the macro-economy has been quite outside the control of successive Chancellors of the Exchequer.
I have been more interested in the use of Budgets as a social weapon rather than an economic one. I see the capital transfer tax as one of the major pieces of social legislation to have been put before us for many years. In eradicating inequality and the use of privilege which can be purchased, the tax is one of the major social instruments at our disposal. It is a major piece of Socialist legislation, and I am surprised that we have not heard more objections to it from the Opposition. I suspect that the reason is that the levels at which it has been put are more or less those of the old estate duty, if not slightly below them.
It is a peculiar situation in this country that we have always taxed the creators of wealth and those who earn wealth more highly than those who are given it, those who inherit it and even those who win it on the pools. Again this is a topsy-turvy situation. There is no social or moral justification for the inheritance of wealth. I cannot see that the fact that someone is fortunate enough to be born either directly to, as a cousin of or in some instances the ninth cousin removed of, a very wealthy man should in any way justify his receiving large chunks of money gratuitously without having done a single thing to deserve it. It encourages the worst aspects of what goes on in this country. Even the Opposition will agree that it encourages such unpleasant things as nepotism, filling the Conservative benches with old Etonians and matters of that kind. The sooner that we destroy inherited wealth the sooner we shall be able to construct a society based if not on merit at least on deserts and the sooner we shall get the creators of wealth coming from people whom it will benefit and from whom it will come back again to the community rather than going to those who inherit it. Some years ago in Venezuela——

Mr. Tim Rathbone: I hope that the hon. Gentleman agrees that from that sweeping statement should be excluded small farmers and small shopkeepers who hand on their wherewithal to the succeeding generation and so make it possible for each generation in turn to make its own special contribution to the country.

Dr. Phipps: I am grateful to the hon. Member for reminding me of the part of


my speech to which I am about to come. I do not agree with him, however. I am myself a farmer. I have a farm. I face this great difficulty about which the CBI told me the other week. When I die I shall not be able to pass on all the farm to whichever of my four children catches my eye as I am writing my will. I am told that I shall have to split up the farm because the tax will be 50 per cent., which means that I shall have to sell half of it. The converse is also true, of course. If the tax were 100 per cent., the difficulty would not present itself to me.

Mr. Ian Gow: If the hon. Gentleman is in difficulty about this it would be proper for him to leave his farm to the Chancellor of the Exchequer. Or perhaps he could leave it to the Chancellor of the Duchy of Lancaster who is in greater need than the Chancellor of the Exchequer.

Dr. Phipps: The hon. Gentleman takes my point.
I now come to the question of the small farmer and the owner of a small business. It is not the ownership of the farm that matters, but the work that is done on it. I see no objection to the farm passing 100 per cent. to the State and the tenancy being given to the son or other inheritor if he wishes to have it. It is the work on the farm and the capital that is put into that piece of land that produce the wealth, not the existence of the land as such, and my principal criticism of what the Chancellor is intending to do is that it goes nowhere near far enough.
We are allowing a donor to give away £1,000 a year and £50,000 on death, I believe, and after that we take at a rate rising to 75 per cent. on a gift of £2 million. I see no justification for that. After £50,000, the State should take the lot. That would make it very much easier to work and would deal completely with the problems of the CBI and the Country Landowners' Association. In addition, it would free hon. Gentlemen in the Opposition from the terrible burden of inheriting large sums of money. I should like to suggest that they are prepared and willing to transfer that burden to the broad and ample shoulders of my right hon. Friend the Chancellor of the Exchequer.

7.31 p.m.

Mr. J. Enoch Powell: I was fascinated to discover that in following the hon. Member for the next-door constituency to Wolverhampton, South-West I was following a farmer, but I thought that the end of his speech was not so good as the beginning. To the first topic on which the hon. Member for Dudley, West (Dr. Phipps) touched, that of the so-called oil revenues and their recycling, I shall come in the course of what I have to say, and I ask him to forgive me if I arrive there by my own route.
First, I want to congratulate the Chancellor of the Exchequer on having been so fortunate as to receive an unenthusiastic response to his Budget. Not for him the experience which comes to Chancellors of the Exchequer who sit down amid a flurry of waving Order Papers, who wake up the following morning to read the laudatory articles in the newspapers, only to find 48 hours or a little more afterwards that their Budget has come to wear a different aspect and to discover after only a few months that little, if anything, is left of its intended consequences.
It is not surprising, I think, that it should be the unpopular portions of a Budget that are often the wisest, and I think that that is true of some parts of the Budget proposals before the House. In using price as a means to ensure the economical use of resources, first by his increase in VAT on petrol, but much more by his reversion to unsubsidised pricing in the nationalised energy industries, the right hon. Gentleman is using the most efficient method that is available.
People confronted with the facts of life in terms of price, either at the domestic level or in the management of great concerns, prove to be much more flexible in their expedients and much more inventive and imaginative than they could possibly have been rendered by any form of control or direction. I believe, therefore, that the right hon. Gentleman is wise in using price to help him in the business of the nation in getting the best return for the effort that has to go into purchasing the nation's energy.
Perhaps also the slight loosening, if that is what it is, of the bonds of price control—though personally I hate the whole


system and consider it totally useless—can be regarded as contributing in some small measure to the rewarding and encouragement of efficiency.
The decision about the nationalised industries—the elimination, which I hope will be as swift as possible, of the mounting element of public subsidy—will assist the right hon. Gentleman in the major object which he has set himself in the control of total public expenditure. I am not sure, experienced though he is in office, whether the right hon. Gentleman even yet knows how severe a task he has imposed upon himself by aiming at an average annual increase in real terms of no more than 2¾per cent. in total public expenditure. Of course, he has provided himself with the useful loophole, or easement, of the word "average", but I trust that the right hon. Gentleman will not have to cash that cheque at an early stage, because, once he has cashed it, his task in the subsequent years of the quadrennium will be all the more difficult.
I hope that in achieving his object the right hon. Gentleman will have the support of all his colleagues, and in particular the support of that colleague whose support is indispensable to a Chancellor of the Exchequer and without which the Lord High Treasurer, nowadays called the Chancellor of the Exchequer, is as nothing, namely, the First Lord of the Treasury, the Prime Minister himself. In other words, I hope that this is the central purpose of the Government in the field of finance, a purpose in which they will persevere.
The right hon. Gentleman has been criticised for pitching the figure as high as 2¾ per cent. per annum. I think that, if comparison be made with previous long-term forecasts of public expenditure for many years past, it will be found that 2¾ per cent. is at the low rather than the high end of the scale. If the Chancellor of the Exchequer finds that he can succeed in this object, perhaps it will be easier for control of public expenditure to be extended later on and made even more effective. At any rate I ask the right hon. Gentleman, and I particularly ask the House, to be under no illusions as to the importance and the difficulty of the task that he has accepted.
Along with my colleagues representing 10 of the 12 seats in Northern Ire-

land, I was returned to this House on an election programme which, on this subject, said as follows:
Believing that the size of total state expenditure is a major factor in this"—
that is in reducing the rate of inflation—
we shall support firm measures to control the rise in public expenditure and prevent government from continuing to resort to inflationary methods of finance.
I do not know whether the official Opposition intend tonight to record a general repudiation of this Budget. If they do, that is certainly not something in which we should be justified in joining them. Indeed we should regard ourselves, while free to criticise and oppose individual elements in the Budget, as duty bound by the terms on which we were returned here to support the Chancellor in anything that will contribute to controlling the rise in public expenditure and fighting inflationary financing.
There was a phrase which may have caught the attention of some hon. Members in the passage which I quoted from the United Ulster Unionists' manifesto. It was the words "a major factor". Of course, the presence of those words refers to a debate, a battle, which has raged these many years now and rages still: the dispute as to the nature, the causes and, therefore, the cure of the scourge of inflation. I have long made no secret of the fact that I believe that inflation, as we know it, derives from a single cause, from a monetary cause, from the excessive expansion of monetary demand in the economy, and that all the accompaniments of inflation—rising prices, rising wages and the rest—are symptoms and not causes.
However, this is the battlefield over which prices and incomes policies of various descriptions, and now their successor, the social contract, have been pushed and pulled, dragged and mauled, year in and year out. So, while noting with some satisfaction that, if I am not mistaken, I seem to be less isolated than I used to be in attributing inflation and its consequences to Government financing, nevetheless I should like to secure in this debate as wide a basis of agreement between all parties to the dispute as can possibly be achieved. For I think that the more we can approach impending dangers conscious of standing upon some


common ground, the better for us and the better for those whom we serve.
I would therefore put this to the House. I will not insist upon one exclusive cause of inflation; but I very much doubt whether there is any hon. Member of any persuasion, whether he is a firm adherent of the social contract, of voluntary prices and incomes policy or of statutory controls, who does not believe that, were a large net borrowing requirement, or deficit on public account, to be financed by borrowing from the banks, with the consequent increase in money supply—or money demand—the consequences would overwhelm and sweep away anything which might be achieved by any of those other policies. Indeed, those who have put those policies forward through the years, including, as my hon. Friend the Member for Barkston Ash (Mr. Alison) brought out very well today, the social contract—those who have constructed one prices and incomes policy after another—have all said "But it is a necessary condition that the money supply should be properly controlled."
So it seems to me that we can stand upon this common ground in facing the appalling threat which overhangs our economy in terms of the unprecedented net borrowing requirement which the Budget Statement revealed. It is a cloud which hangs over the entire scene, because no hon. Member would dispute, whatever his other opions, that if a sum of those dimensions or anything like it should have to be financed by resort to the banking system, the inflation which would follow would be massive and disastrous in its consequences.
In years gone by a Chancellor of the Exchequer faced with a net borowing requirement had two recourses open to him, and two only. They were the classic alternatives of borrowing from the public—and thus transferring purchasing power, with no net effect upon inflation—or of borrowing from the banking systerm and thus expanding the credit base of the banking system with the inevitable inflationary result. But there has been a striking change in this debate in the last 12 months. For now the Chancellor of the Exchequer not only has, but has used on a massive scale, a third alternative, that of borrowing from overseas, which in its immediate monetary effect is

exactly the same—is no more inflationary in its immediate effect—as if he had been able to borrow a like sum from the domestic public.
In looking at this new factor of the scene and placing it against the background of our unprecedented net borrowing requirement, I ask the indulgence of the House for a minute or two of semantics on the subject of the balance of payments. Over years of brainwashing, we have come to use the words "balance of payments" in a sense exactly opposite to their natural meaning. We have learned, over these years of travail, to say "balance of payments" when we really meant a deficit in some element or another of the overall balance of payments.
The fact is that a balance of payments is—what it says—a "balance" of payments and cannot be anything else. A country's total payments in and out always balance, always have done, and always will do, for the simple reason that they cannot help it. Indeed, they are two aspects of one and the same transaction. By an inscrutable but all-wise dispensation of providence, it is a fact upon which we may rely that the number of pounds relinquished in order to procure francs is exactly the same as the number of pounds secured by relinquishing francs.
Indeed, the reality of a balance of payments is a volume of exchanges of one currency into others, which therefore is automatically self-balancing. This mass or volume we attempt, for purposes malevolent or beneficent, to analyse into two columns—in and out. We rarely succeed. Hon. Members who have made a habit, as I have, of keeping the balancing items from year to year as special pets will know that the statisticians are sometimes a very long way out in their attempts to analyse the inevitable overall balance of payments into various items in either column of an imaginary balance sheet.
In this analysis one of the big subdivisions is that between current account and capital account—between payments in and out of current account and payments in and out of capital account. Since the balance of payments must balance, cannot but balance, it follows that to a deficit on any element which we choose to identify separately must correspond an exactly equal surplus on all the rest, and vice versa.Thus to a deficit of a


given amount on current transactions must correspond an equal surplus on capital transactions, and vice versa. Like seasickness in the Punch cartoon, it does itself. This is of the necessity of nature. We cannot have a given surplus on our capital account—in other words a given net inflow of capital into this country—unless we have exactly the same deficit on our current payments.
I hope that I have not over-laboured the point; but it brings me straight to the nature not just of the right hon. Gentleman's predicament but of the predicament of this House as the guardian of the nation's finances and therefore of the country as a whole.
Paradoxically, it is the deficit on our current account which has enabled the right hon. Gentleman to cover so much of his net borrowing requirement by borrowing from overseas. If there were no deficit on current account, there could be no net borrowing from overseas. It would be impossible. So he and all of us are caught in a tragic triangle, a triangle which consists of, first, the deficit on current account, the so-called balance of payments deficit; second, the borrowing from overseas, sometimes called recycling of the oil revenues and all the rest; and third, the net borrowing requirement. The net borrowing requirement, met by the borrowing from overseas, is possible only because of the huge deficit on our current account. The three are causally linked together, so that if any one of them were to be disturbed, big changes must take place in the others. For example, if there were no borrowing from abroad, the value of the pound in the exchanges would have to fall to the point at which our current account balanced, as well as our capital account.
This triangle—current account, overseas borrowing, net borrowing requirement—is, I believe, pregnant with great danger to us at present but also contains within itself the seeds of great hope and encouragement for the future.
Let me indicate first where the peril lies, though this has been referred to many times in this debate. If by any chance the flow of lending from overseas slows clown or ceases, not only, as I have said, would there be a precipitate fall in he exchange value of the pound but also,

since the net borrowing requirement would be uncovered, it would be inevitable, with so large a mass, that it would be financed by inflation on a scale which would be likely to sweep away all the other intentions and undertakings of the Chancellor of the Exchequer. So he lives under the constant threat of inability to finance the net borrowing requirement by this means. If, of course, that flow were not merely to cease but were to be reversed—and these lendings are in forms which are readily reversible—our situation would be so much the worse; for the value of the £ sterling would have to fall even further as we endeavoured to make the repayments which were called for.
We are living literally on borrowed time. We are living under the shadow of a danger which may come upon us at any time and from unexpected causes. We cannot be safe, none of the policies of the present Government can be safe, as long as there is a net borrowing requirement of anything like that size. The fact that at present it is being financed, as the right hon. Gentleman has told us, in no way diminishes the nature of the peril.
But now, having invited the House to look upon this picture, to look upon this danger, I now ask the House to look upon the reverse side. Let us suppose that, by control of the total of public spending, by achieving his object and by achieving it in such a way that he reduces his net borrowing requirement to domestically manageable proportions, the right hon. Gentleman no longer needs to borrow these portentous sums from overseas. What would then happen? One thing which would happen—if I may say so to the Chancellor of the Duchy of Lancaster, it was the one point which was missing from his speech this afternoon and which the hon. Member for Horsham and Crawley (Mr. Hordern) repeatedly attempted to insert—would be that through the withdrawal from the market of this huge borrowing demand by the British Government, the balance of supply and demand for loanable capital would be radically altered and, in consequence, interest rates would fall. That would be the inevitable consequence: interest rates would fall sharply if £5,000 million of borrowing demand was withdrawn by the Government from the market.
There has been tremendous talk and great anxiety—justified anxiety—about investment. But to talk about investment, to talk about British industry investing—what I am going to say is not seriously altered by the new institutional arrangements, and I do not believe the Government would claim that it is—when the going interest rate for industrial investment is between 15 per cent. and 20 per cent. is really a mockery. This country cannot invest in its industries, our industries cannot go ahead with new capital, when interest rates and the price of new capital for industry stand at 15 per cent. to 20 per cent. per annum. That is where the hole is. That is where the obstacle ties to the investment for which we are all, on both sides of the House, looking. Remove the net borrowing requirement, remove the huge Government borrowing from the market, and interest rates begin to reflect something like the real balance of supply and demand for investible funds.
But what would happen to the flow of money from overseas? I suppose that those who are lending the right hon. Gentleman this money, whether it is His Imperial Majesty the King of Kings, the Shah of Persia, or whether it is any less distinguished investor, are not doing it for the sake of his beautiful eyes or out of love for the British nation, to help them—mistakenly indeed—in their difficulties by covering their net borrowing requirement. They are doing it—I should be shocked if they were not—because they regard it as the best place for the time being to put their money. No doubt the interest they are getting on it is a substantial element in their calculation; but it is by no means the only element. Of course, if interest rates fall sharply in this country, as they would do were the Government as a massive borrower to withdraw, the transfer of funds to Britain would be that much less attractive so far as immediate interest went, and a different balance would have to be struck in the new circumstances between the deficit on current account and the surplus inflow, which I have no doubt would continue, on capital account.
But it is not only the current rate of interest which attracts capital into the country. It is not the current rate of interest which most attracts the sort

of capital which we need. I should need a great deal of persuading to believe that a Britain which had shown itself capable and determined enough to finance its public expenditure without this vast net borrowing requirement, a nation which was clearly determined to regain the stability of value of its currency, would not appear to be one of the most attractive havens and investments from one end of the world to the other for those who had capital to invest.
A deficit on the balance of payments—I have already suggested this—is not a curse in itself. It can be a blessing. The United States and Canada would not today be the countries they are if they had not had corking deficits on current account in the 19th century: it was the counterpart of the massive investment which took place in those countries.
I believe that this country today is in a position somewhat analogous to that; for I have an unrepentant faith in the future of British industry and commerce, and therefore in the ability of British industry and commerce to attract investment not only from our own citizens but from most parts of the world where there are investible surpluses.
This hope, which I have ventured to express and which is the counterpart of the fear under which we live, is one by which the two sides of the House need not be divided. In asking the Government to eliminate this huge net borrowing requirement I am not asking Labour Members to give up any of the characteristic tenets in which they believe. If they believe that the management and ownership of the State should be proportionately extended in the British economy, that can be achieved consistently with honest finance, with the avoidance of inflation and without an unmanageable net borrowing requirement.
Nor is the absence of a net borrowing requirement a threat to any section in the community. Surely it is not part of the tenets of Socialism—if it is, it has been very well concealed—that it should make its advances by way of inflation. I am sure that Labour Members made that as clear at successive elections as any other candidates have done.

Mr. Lever: I am interested in the right hon. Gentleman's argument and I


do not want to give encouragement for precipitate action. Is the right hon. Gentleman saying that the Chancellor could finance the buying-up into public ownership next week of half of British industry without increasing the borrowing requirement?

Mr. Powell: I was not contemplating, despite what I hear of the power of the Left wing and the Tribune MPs, that the Chancellor would be engaging in that spree next week; but the right hon. Gentleman knows as well as I do that the essential nature of nationalisation is not buying up in the sense of an individual purchasing an article; it is a transfer and exchange of rights to receive future revenue. [Interruption.] Of course, I know perfectly well that it involves creating Government liabilities, but not necessarily putting these liabilities on the market. I challenge the right hon. Gentleman or any other hon. Member on the Government benches, when we are hereafter told their intentions on nationalisation, to say that they intend to accomplish the process by inflation. Are they saying that they intend to do it dishonestly or openly, as a democratic party in a democratic Parliament?
There is nothing between any of the elements of the House in this respect. There is no element in this House that could achieve its ends only by means of the net borrowing requirement by which we are threatened. Conversely, that means that the Chancellor should be able to appeal to the whole House for assistance in his central task—to reduce that net borrowing requirement to proportions which can be financed now and hereafter without the risk of causing inflation.
Appeals are made for national unity. I believe that there is a great deal of sincerity in them and that there is at least as much sincerity out of doors as there is indoors when that appeal is made. Here, then, is an area for the exercise of national unity, not by the pretence that the two parties are identical, not by the pretence that we do not differ in our social objectives, but by the acceptance that we agree on the nature of our national predicament and that, therefore, we can agree in our determination to banish the danger and to restore the hope and the prospects of Britain.

8.5 p.m.

Mr. Geoff Edge: It is always a pleasure to listen to the right hon. Member for Down, South (Mr. Powell). I had thought that my right hon. Friend the Chancellor had imposed value added tax on all forms of entertainment, but after a speech like that I realise that some entertainment is still untaxed.
I have been listening to the right hon. Member for Down, South for many years. I think that 1962 was the first occasion I can remember, and then he made a speech praising the export record of the British motor cycle industry. That was an infinitely less controversial speech to make then than it would be to make now. Of course, I have listened to the right hon. Gentleman on occasions since then as with each speech he has grown more and more famous and become more and more publicised, through Rookes v. Barnard, rivers of blood in the Tiber, needs being converted into rights at Leicester and so on. I heard them illicitly because most of the meetings were guarded and it was only by obtaining a ticket through the black market mechanism that I was able to get in and hear what he said.
I do not share the right hon. Gentleman's faith in the power of the market mechanism. Its intellectual attractions are considerable. We realise that the right hon. Gentleman's intellectual advice about the perfect economic world—that if only the market were left to itself all would be well—is fine and fascinating. Unfortunately I do not believe, after a long study in one of the backwaters of economics, that this ever happens in the real world.
I do not believe it is desirable in any way to try to make a major cutback in public expenditure. Too often in this House we lose sight of the realities of particular policies which are advocated. I am deeply concerned about the attempt to limit public expenditure increases to 2¾ per cent. Only last night, sitting in a council chamber in North Buckinghamshire, I was asked as vice chairman of the planning committee to give my consent, because of lack of money, to the construction of temporary classrooms which would last 10 to 15 years. I was asked to give my consent to a temporary school which was intended to last for 15 years. If that is what cutting public


expenditure or containing the growth of public expenditure means, I regard it as unacceptable.
Let us be under no illusions. I know from a brief chance to peep inside the activities of the Department of Education that any further cutbacks in that Department's money will mean that no slum schools will be replaced, because the money that is now available means that only one or two can be replaced anyway. So we would be throwing away the whole of the school replacement programme. It might even be that we would go further and lose many of the basic needs places which are vital if we are to provide that classrooms do not become desperately overcrowded.
There are other dangers. If we say to the local authorities that the amount of money they can have via the Public Works Loan Board is limited, perhaps they will cut back on recreation projects, and possibly in time of financial stringency and crisis there is a case for doing that. But they would need to cut back on some of their key housing projects as well. We have seen in the last four or five years a dramatic growth in the numbers of people on housing lists, people who are inevitably forced to look to the local council for a house because the market mechanism has deprived them of the opportunity of ever buying a house. There is, therefore, an urgent need not for less finance for local authorities or less public spending but for more if we are serious in seeking to reduce housing lists in any way.
The prospects of replacing our old hospitals are threatened. Already a hospital in my constituency, the starting date of which was given as 1980–81, runs a danger of being delayed still further. Even an attempt to contain the growth of public expenditure to 2¾ per cent. would mean consigning our children, our sick and our young couples to living conditions or educational conditions that no hon. Member would regard as acceptable.
The Government have a duty to the House to set out in detail at the earliest opportunity the exact effect of their proposed controls of public expenditure so that we may all know exactly what they imply and what is involved. We may

then be able to argue on the priorities that their detailed statement suggests.
There is one other matter in the Budget with which I take issue. I refer to the whole question of investment. I have no faith in the market economy or the capacity of British industry to secure an adequate degree of capital investment. Since 1945 we in this country have, with a particularly British skill, found it possible to invest less of our national resources in modernising industry than any other major country in Western Europe. Why should we now believe that the old remedy of encouraging capital investment via the market should suddenly produce the results which it has failed to produce since 1945, under successive Governments with different political attitudes? That is to promise a new future for Britain and to come out with an old, worn-out solution.
The proposal to invest new money in Finance for Industry is dangerous. For one thing, it does not meet the criterion of my right hon. Friend the Chancellor of the Exchequer of being selective in the aid we give to industry. It is not selective in terms of the regions, the size of companies or the industrial sectors which receive aid. For example, we are not asked to use Finance for Industry only to help small and medium-size firms, whatever those vague terms may mean. Category 1 firms with over £50 million of annual turnover could benefit from Finance from Industry, so presumably all firms could benefit [Interruption.] My right hon. Friend the Chancellor of the Duchy of Lancaster seems to be suggesting that Category 1 firms will not be able to benefit.

Mr. Lever: All firms will benefit.

Mr. Edge: I am delighted that we have managed to obtain that confession from my right hon. Friend. Some of his friends in the Treasury were suggesting otherwise earlier today. I should hate to misconstrue my right hon. Friend's remarks, but it seems that all firms will be able to benefit, large as well as small.

Mr. Lever: I should not have intervened from a sitting position. So that I am not misunderstood, let me make it plain that when I say "all firms" it is not size that will determine the possibility of acquiring loans. It is the purpose


of the loans—capital investment, exports and the like.

Mr. Edge: I thank my right hon. Friend for that information. It is only right that the House should be clear exactly what is proposed. I raised the matter only because some of my right hon. Friend's Treasury colleagues were suggesting that there would still be some control over the size of firm that could go to Finance for Industry. My right hon. Friend has given us a valuable piece of information. What he says makes the proposal for Finance for Industry even more objectionable than I and some of my hon. Friends had suspected. It means that we are abrogating any chance to influence and control the directions of capital investments in this country and any chance to influence the areas of regional investment.
No one would object to small firms, desperately short of liquidity and the opportunity to obtain investment capital as they are, being able to benefit from the existing arrangements under Finance for Industry. No one would object to their using the regional offices of the Finance for Industry organisation to obtain immediate, short-term capital. Indeed, for many small firms only the existing apparatus of Finance for Industry could possibly provide economic aid in time. The proposals of my right hon. Friend the Chancellor of the Exchequer for £2,000 million of investment will not come into effect in time for many of the small firms that are in financial difficulties. Therefore, no one would object to that idea.
But if the Government were serious about producing a policy for small firms, they would need to begin to argue with the local authorities as well. The local authorities, great cities such as Birmingham, have a major impact on the economic future of small firms, by demolishing cheap industrial premises and forcing small firms to move, by charging them rents they cannot afford. By all means let us agree that we should have a policy for small firms, but let it be genuine and realistic, a policy that recognises that small firms need cheap industrial premises just as much as they need investment capital.
Let us also recognise that many small firms are a transitory element in the economy. In the West Midlands, for

example, which the right hon. Member for Down, South knows well, the mortality rate of small firms is very high. There are 22,000 firms in the West Midlands, well over 10,000 of which have a life expectancy of only five years. The employment they create is essentially transitory. Their economic problems are essentially different in character from the problems faced by large companies, the Category 1 firms with a turnover of more than £50 million a year.
Far from creating the Finance for Industry organisation, we should try to get private capital to flow into the National Enterprise Board. My right hon. Friend the Chancellor of the Exchequer should have said "As a matter of urgency, I intend to create the National Enterprise Board. As a matter of urgency, I intend to introduce a system of planning agreements so that we may sit down with the large firms, which together control 50 per cent. of our economy, and argue together how the economy should develop, argue where there is a desperate need for capital investment, not only in particular sectors of industry but in particular regions."
Since 1947 we have adopted a regional economic policy aimed at eliminating unemployment in Scotland, Wales and Northern Ireland. It has been a spectacular failure, because we have not been prepared to try to direct industry more and to consult it more on exactly where industry is to be located.
It is possible for Opposition Members and my right hon. Friend to take a different view, to believe that the Government should not extend their influence over the economy, that they should not concern themselves to such an extent with the detailed pattern of industrial investment. That is a reasonable view to take. All of us on the Labour benches, however, were elected with a pledge to create a National Enterprise Board and to introduce a system of planning agreements. Giving the FFI its greatly expanded rôle does not bring that policy nearer to fulfilment. Indeed, it carries the Utopia in which we all believe further away. I hope that my right hon. Friend the Chancellor of the Duchy of Lancaster will acknowledge that those few Utopians who are left have been deeply disillusioned by some of his proposals.
I do not believe that it is possible to solve the fundamental economic and industrial problems of this country unless we are prepared to intervene in industry on a massive new scale. That means the Government being prepared not only to use their own finance, whether borrowed or raised from the taxpayer, but to try to harness private finance in their efforts to control industry to a far greater extent, with control not for its own sake but to produce an integrated economy in which the shortages and blockages that inevitably occur as an economy expands are eliminated.
That is the challenge we face. Unfortunately I do not believe that the Government's proposal helps to carry us along the right road.

8.20 p.m.

Mr. Peter Hordern: I agree with the hon. Member for Aldridge-Brownhills (Mr. Edge) in one respect at least and that is on his close concern with public expenditure. I agree that the sooner the House obtains details of the proposals on public expenditure the better. It is a little shameful that we have not been given far more details by the Government in the Chancellor of the Exchequer's Budget Statement. I hope that we shall not have to wait too long before we see exactly what are the proposals, and particularly those for the nationalised industries.
I wish first to concentrate my remarks on the deficit and the borrowing requirement, about which a great deal has already been said. It is in absolute terms an enormous balance of payments deficit and an unconscionable borrowing requirement. I could quote what the Chancellor of the Exchequer said about the borrowing requirement which he had inherited and how essential it was to reduce that borrowing requirement as soon as possible, but I will not do so. The fact is we find ourselves with this borrowing requirement, plus a record balance of payments deficit. The borrowing requirement is not only large in absolute terms but is large in relative terms compared with the balance of payments deficit and, indeed, with the borrowing requirements of our major competitor countries.
I believe that the Government's hope in fulfilling the borrowing requirement is

very much subject to what the OPEC countries decide to do in their own interests in investing their funds, and it is important to understand our relative position. Every major country is hoping to make an improvement on its balance of payments. Indeed, this is what the Chancellor of the Exchequer said that he was out to do. He said that our balance of payments was running at slightly less than £4,000 million. Nevertheless, it is the worst balance of payments deficit of any of the major countries. I believe it is true that we are making the least effort to restore our balance of payments, compared with other countries. Certainly the right hon. Gentleman has tried to persuade other countries to take a more expansionist view of their economies than they are at present determined to do.
There is another danger that must be faced. Every country has forecast that it will be able to retract its balance of payment deficit, but the one certain thing is that the size of the overall deficit will be about $70,000 million. This is a sum which will have to be covered and there will be an ugly rush round the musical chairs to avoid being the country with the largest debtor position.
In our position we have the least advantage compared with other countries. We appear to have the highest unit labour cost of our competitor countries. It also appears that our balance of payments is not only worse than the situation in those other countries but that our balance of trade, as yesterday's figures showed, is in a rather worse position than that displayed in our competitor countries. Therefore, we face a prospect of an increasing balance of payments deficit and a growing borrowing requirement.
It is important to recognise this fact in assessing what chances the Government have of fulfilling this borrowing requirement—namely, a figure of £6,300 million. It is an unthinkable sum for any ordinary method of financing through the domestic market. It can only be filled through investment from abroad and from the OPEC countries. I would not be surprised if the Chancellor of the Exchequer or the Government were to announce some major loans made to the Government to fulfil a large part of the borrowing requirement, but I would part company with anybody who said that it makes no difference in cost terms to this


country compared with fulfilling our borrowing requirement domestically.
What matters is the calculation of interest which we have to pay to our overseas creditors. If we were to be lent £4,000 million the interest would be reckoned to be not less than 10 per cent. The £400 million paid in interest could not be counted as anything less than a tax on our country, whereas interest paid domestically would be at least a receipt in the hands of our own people. Therefore, there is a large straight tax which is being placed on our people, even if there is a hope that we might fulfil the borrowing requirement. I also believe that the overseas creditors will be looking to us in another way. They will not be concerned only with the size of the borrowing requirement for one year only, what will concern them most is the prospect for the future.
Let me turn to the point which was being made by the right hon. Gentleman the Chancellor of the Duchy of Lancaster about new finance for industry. The point I was making to the right hon. Gentleman—he was not asleep as he was talking at the time—was that to the extent to which institutions would fulfil his Finance for Industry undertaking there will be taken from the market funds which could have funded the borrowing requirement in general. To the extent of £1,000 million, which is no insignificant sum, that amount of money will not now be available to fulfil the borrowing requirement.
I do not need to dwell on the tragic results that will occur if, for any reason at all, the borrowing requirement is not met either from home or from abroad—[Interruption.]—The Chancellor of the Duchy of Lancaster says it will be, and I am delighted to hear it. What they will look at carefully is the prospective balance of payments deficit and borrowing requirement in future years.
I wish I could draw comfort from the Government's proposals, brave and bold as they are, to keep their public expenditure down to an average of 2¾ per cent. a year for four years. This will be a most difficult undertaking. If my experience of reading Public Expenditure White Papers holds good for the White Paper we are about to receive, we shall see a comparatively large increase

in public expenditure this year and next year followed by a sharp reduction in the following two years. I hope I am wrong, but this has been my experience over the years. We are likely to find little growth in the economy either this year or next year. Our level of public expenditure in the next two years will greatly exceed the amount of growth that we can expect in the economy. Thus, I fear that public expenditure will take a larger part of our gross national product and our borrowing requirement may well become larger.
The Labour Party is right to ask what the Conservatives would do about cutting public expenditure and we shall debate this matter later. In respect of local authority expenditure, not only has it grown rapidly in recent years, but the number of people engaged in local authority work has grown to a remarkable degree. During the last 10 years, the number of people employed by local authorities has gone up by no less than 50 per cent. I cannot believe that the standard of the service which the Government and the local authorities have provided in that time has improved to such an extent that they require another 50 per cent. staff. This is one aspect to which the Government could look in dealing with expenditure, and I hope that we shall see some progress on it.
I turn now to the proposals for companies. I recognise the value of the relief that the Government have given, but it would have been very much better and simplier for all concerned had the Government scrapped the whole of the price control system, so that companies knew precisely where they were. What the Chancellor of the Duchy of Lancaster fails to realise is that it is not that the companies require a cash injection, let alone loans on a medium-term basis, because interest rates are very high. What they require is an assurance that they can operate in market conditions and plan their operations in confidence. They are more able to do that if they have the freedom to charge prices in the market and not according to the obscure and complicated set of regulations which the Government have foisted upon them.
The position we are in is remarkable, especially when one takes out of account the amount of money which might be subscribed by domestic lenders to the


Government. About £4,000 million needs to be found from abroad to fulfil our own current and capital expenditure. Thus, we are dependent for one-eighth of our current and capital expenditure on overseas lenders. It is a remarkable position that we find ourselves in when we have a Labour Government committed to a fully Socialist policy supported and financed by His Imperial Majesty the Shah of Persia. How long this situation will go on I do not know, but I confidently expect to listen to the Chancellor of the Exchequer unfolding his next Budget in January.

8.32 p.m.

Mr. George Park: Amid the general noises of approval of the Budget proposals that we have heard today there is one matter on which there are grave doubts, and that is the situation of local government. Most Chancellors of the Exchequer seem to have the idea that local government expenditure can be turned on and off like a tap. I admit that my right hon. Friend is not seeking to emulate his predecessor, but the fact remains that the local authorities have not yet healed the wounds inflicted on them by the Barber axe.
The proposals now before us seem to ignore the fact that local authorities are committed to an increased need for resources of men and money. The hon. Member for Cornwall, North (Mr. Pardoe) felt that cuts could take place in those areas of expenditure only where there were no statutory commitments. I want to remind the House of some areas where there are statutory commitments and where the needs are continuous and rising.
For example, when the Chronically Sick and Disabled Persons Act was brought in not a single local authority was in a position to say how many people were affected or how much it would cost. Even today the lists are being added to and local authorities still cannot quantify the total amount which comes under the heading of the Act. The same applies to the Children and Young Persons Act.
Then again, there can be no doubt that additional resources are needed to implement the comprehensive schools programme, and, as has been said, the

replacement programme is in some severe danger. My right hon. Friend expresses the view that we have to make up the lost ground on the housing programme, but if their housing programmes are to proceed the local authorities will need to be given, for example, more money for sewerage. It is not possible to get houses off the ground till we have sewers in the ground.
The Severn-Trent Water Authority is already £2 million in deficit. That non-democratic organisation is proposing highly expensive administrative schemes which should be chopped off at the roots. Even when that is done—and I hope it will be done—there will still be greatly increased precepts on the district councils' water rates in the coming financial year. They will have to be met.
Given the levels proposed in the Budget there can be little doubt that we shall see increased charges for day nurseries and other supportive services. We may reach the point of having to impose staff redundancies. I believe that my right hon. Friend is using far too broad a brush when he tells local government not to engage any more staff. He leaves out of account examples such as those with which I am familiar in the West Midlands Metropolitan County Council. That is an authority which engaged only a minimal staff. It increased its staff gradually as its responsibilities increased. To suggest to that authority that it should now have an embargo placed upon it can only mean that there will be great gaps left in its ability to discharge the responsibilities laid upon it by central Government. On a more mundane level, the general public will have to become accustomed to long delays in the carrying through of the procedures associated with such items as planning blight.
Those are some of the basic facts of life that face local government and which are passed over in a facile way by some hon. Members using the shorthand term of the control of Government public expenditure. We must first ask ourselves what the money is being spent on before that expression starts to get some flesh on its bones. I have listened to Conservative Members in full cry on the rate levels. I have no doubt that they will be equally vociferous if the standards and scope of local government services begin to deteriorate.
It is a fact that the general public—I do not exclude myself—talk with two voices on rates. They complain, and probably rightly, about the level of rates. At the same time, when it becomes clear in an indivdual family that the provision for the children's education is not adequate we reserve the right to complain bitterly to the local authority. We also complain if there are homeless people on our streets. We want to know what local government is going to do about it. It can only take action on such matters if the money is provided.
We must find a new way of financing local government. Everyone agrees that the present system is out-dated. I urge hon. Members to throw the baby out with the bath water. I ask them not to place on the system strains which could cause the whole structure to collapse. During local government reorgansation councillors were urged to adopt a more corporate management approach. I do not see this Government and I did not see previous Governments taking note of that advice themselves.
I have had bitter experience of coming to this place many times with local government delegations. If the delegations had a problem which concerned more than one Department it seemed to be impossible for the local government representatives to see at the same time Ministers or officers from two Departments. It seemed that there always had to be two or three separate meetings. If we are looking for efficiency even in that limited area it is clear that we can save the time of local government representatives and avoid the passing of the buck between various Departments and the resulting frustration at local government level. It seems that collective responsibility stops short at the Exchequer. Each Minister fights like mad for money to run his or her Department. Only the Exchequer retains the right to determine what each Department will receive.
It would be of interest to all concerned with good local government if they could be told what efforts were made to collate the many requirements placed upon local government by central Government before arriving at the 2·75 figure. Because that level of resources can only hurt the very people who I am sure my right hon. Friend seeks to help.

8.40 p.m.

Mr. Douglas Crawford: As a parliamentary veteran of two or three weeks, may I join in the congratulations to the hon. Member for Hemel Hempstead (Mr. Corbett). We who travel a lot between Scotland and London know Hemel Hempstead quite well. If I may bowdlerise Dr. Johnson, with the Scottish economy facing a tremendous growth the noblest sight for a Scotsman may be the railway north leading to Scotland.
Although I admire the manoeuvring of the Chancellor of the Exchequer between the pit and the pendulum, between Scylla and Charybdis, I wish to make one or two Scottish references and say that when Scotland resumes self-government he may be left with Corryvreckan but there will not be a Scylla and not much Charybdis and he will be able to reach Ithaca without difficulty.
We have heard references to "this country, this nation". As my hon. Friend the Member for Carmarthen (Mr. Evans) pointed out in the debate on the Queen's Speech, there are four nations in this island. From Scotland's point of view this is a very disappointing Budget. Once again we are being made to take medicine for an illness which we do not possess.
The proposals which I shall make will be unorthodox in this House. Scotland, as my hon. Friend the Member for the Western Isles (Mr. Stewart) pointed out, has no balance of payments problem. The Scottish Council produced a survey in 1968 showing that Scotland exported more than she imported and sold more overseas than she bought from overseas. Scotland is largely self-sufficient in terms of most basic foodstuffs. Her average wage levels are lower than those south of the border and unemployment in Scotland is higher than south of the border. Yet we now have one of the greatest potentials for growth of any country in the whole of Western Europe. It is unthinkable that any Scottish Chancellor of the Exchequer would in those circumstances produce what is really a deflationary or at best a neutral Budget. There would be no need for a Scottish Chancellor of the Exchequer to walk through a minefield avoiding the pits and the pendulums, the Scylla and Charybdis, because there would be no more Scylla or Charybdis.
Any Scottish Chancellor of the Exchequer would reflate because in a self-governing Scotland we would have a balance of payments surplus. Because at the moment we have high unemployment and lower wages, we would be able to reflate the Scottish economy without any danger of overheating, as is happening in the United Kingdom at present. A Scottish Chancellor of the Exchequer would allow an expansion of local authority expenditure in Scotland, perhaps by at least £300 million. A Scottish Chancellor of the Exchequer would encourage the development and stimulation of indigenous industry in Scotland by means of a development corporation with an initial capital of £100 million. Any Scottish Chancellor of the Exchequer would do much more for Scottish agriculture than the announcement of a kind of relief in capital transfer tax, to which farmers in my constituency have said no more than "so far so good, but we fear what is to come."
There is a deeper philosophical point to this, and I state this as an unashamed Anglophile. I wonder whether England has the will to reach her economic salvation. What I do know is that self-government in Scotland will be of benefit not only to Scotland but also to England. The English body politic and economic is so centralised, and perhaps even fossilised, that it needs a major constitutional change if she is to escape from the stagnant waters.
My party believes that self-government for Scotland will administer that kind of constitutional change which will help England to regain her economic sanity. We in Scotland wish to see an economically and politically healthy England and we shall do everything we can to help England regain her prosperity. To be able to help England best we must have our own Scottish budget, our own reflation and our own chance to realise our own undoubted potential. The Budget will not do for Scotland.
I close with a few remarks from the Church and Nation Committee of the Church of Scotland. In a recent report it said:
It can only, therefore, be reiterated even more firmly than before that any scheme for legislative and executive devolution, if it is to

be meaningful and worthwhile, both to the people of Scotland whose interest and participation are essential, and to the members of the legislature, must provide for real, substantive powers in the economic field.
I ask the Chancellor and the hon. Member for Henley (Mr. Heseltine), in replying to the debate, to acknowledge that Scotland, with no balance of payments problem but with high unemployment and low wages, needs a reflationary and not an inflationary or deflationary Budget.

8.46 p.m.

Mr. Russell Fairgrieve: Speaking to my constituents last week I said that there was precious little in the Gracious Speech for West Aberdeenshire. I must now say that there is precious little for them this week in the Chancellor's Budget. I wish to speak about the 25 per cent. VAT on petrol and the tax adjustments that will affect farming and forestry.
I very much regret the introduction of another rate of VAT, which is a tax that should be levied either at one level or at a nil level. The whole point of the change from purchase tax to VAT was to return responsibility to the individual to decide his or her priorities rather than have the gentlemen in Whitehall deciding what was a luxury and what was a necessity. In my opinion a car is a luxury in Central London but a necessity in West Aberdeenshire. This is a tax on distance. If there had to be an increase on petrol it would have been better done via excise duties. That would have carried out one principle in the Budget, that of trying to show what real costs are to all concerned.
The new principle of letting the public know how much coal, electricity, gas and telephone services really cost will not apply to food. Our import bill for food and timber must be over £1,000 million each, making a grand total of about £2,500 million. We could grow much more of our food in this country.
With forestry it is tragic that the United Kingdom, which should have about the highest percentage acreage of trees in Europe, has about the lowest. At all times this nation should do everything it can by taxation and other methods to encourage agriculture in its widest sense and not discriminate against it as has been done by this Budget.

8.48 p.m.

Mr. Ivor Clemitson: There are two points I wish to raise, one of which is similar to an issue dealt with by the hon. Member for Aberdeenshire, West (Mr. Fairgrieve), namely the question of the VAT increase on petrol. The purpose of this move, according to my right hon. Friend, is to promote the saving of scarce fuel supplies, yet at the same time he tells us that he expects to rake in an extra £200 million a year from this increase.
I wonder whether the Chancellor is following the age-old tradition of his predecessors—that of condemning a practice, whether it be smoking, drinking or using too much petrol, as being deleterious to health or to the economy of the country and at the same time hoping that people will completely ignore his moral strictures and continue in their wicked ways. If my right hon. Friend hopes to get an extra £200 million, he cannot have much faith in the efficacy of his measure.
I am sure that my right hon. Friend is serious when he says that he is concerned to conserve energy, but I am equally sure that he has gone completely the wrong way about it, for two reasons. First it is unfair, it is rationing by price, and secondly, there is no assurance that it will work. He himself appears to have considerable doubts on that score. Surely he should have announced that petrol would be rationed. Rationing would have been fairer, and due allowance could have been made for people living in rural areas. It would have ensured a positive limit being set on the amount of petrol used.
The second aspect on which I wish to touch is the relationship between investment and employment. There seems to be a wide measure of agreement in the House that full employment should be a major goal of economic policy. There also seems to be a wide measure of agreement that we need more investment. The assumption which I wish to challenge is that investment is the way to ensure full employment—in short, the assumption that more investment means more jobs.
A large slice of the help which will be forthcoming to industry from the Budget is in the form of the relaxation of the Price Code. More particularly, help is coming in the relaxation of the

productivity deduction factor—a marvellous piece of jargon. I understand this to mean that the more labour-intensive a company is, the more it will be able to pass on any increase in wages to the consumer. This extra money in the system can be used for two purposes, either to oil the machine simply to keep it going, or to replace machines with new ones. If, as we are told, there are many firms which need money to pay off creditors and to pay the wages of their employees and without which the firms would go into liquidation and their workers would consequently be put out of a job, there is clearly a case for putting more oil into the machine, provided that this is seen as a strictly short-term operation to get us over a bad winter. No worker thrown out of his job this winter because his firm went bust for lack of cash would thank us if we failed to do something to help.
When we come to the question of replacing a machine, not simply keeping it going, there are rather different problems. I do not question the need for more investment. We need more investment partly to produce more wealth and partly because we must move into higher and higher realms of technology, but we must be clear about the effects that investment brings particularly on jobs.
From an investment point of view, the concentration of help on firms which are most labour-intensive makes sense, but it makes sense only if we realise that we are trying to make those firms less labour-intensive. In other words, they will retain the same labour force after investment only if their output goes up. The less labour-intensive and the more capital-intensive those firms become, the more will the output have to rise for the same labour force to be retained.
Yet we are told by my right hon. Friend the Chancellor that output is expected to rise only slightly over the next few years. We must face the fact that one of the main causes of the drop in employment in manufacturing industry—it has dropped 12 per cent. in the last eight years—is precisely investment. Industries are becoming and will increasingly become more and more capital intensive. More and more will investment be labour-replacing, and fewer and fewer people will be employed in manufacturing industry. This is no bad thing. Indeed,


I think it is to be positively welcomed, provided that the rundown of employment in that sector of the economy is done in such a way as to avoid unemployment.
Since 1966 the total working population has declined both in absolute numbers and in terms of percentage of the total population. This has happened partly because we have nibbled at the edges of the problem. We have raised the school leaving age. I wonder whether we did that for quite the right reason. We have also retired people from their work earlier. In my constituency a new scheme has come into operation at Vauxhall Motors in which people are retired at 58 years of age instead of 65.
Much of this has happened rather than been planned. I am pleading for a planned approach to the rundown in employment in manufacturing industry, a rundown that will increasingly occur as industry becomes more and more capital intensive, as more and more money is invested in it. This will involve such matters as shorter working hours, longer holidays and sabbatical leaves. It will also involve redeployment of labour.
We have to consider increasingly redeploying labour out of manufacturing industry into other areas. I suggest that one of the most important of these areas is that of public service, including, for example, teaching, the social services and public transport. There is a long list. Yet it is at precisely this time that we are talking about severe restrictions on public spending. The number of teachers is being cut. Public transport is suffering from cutbacks, and fewer and fewer buses are being put into the fleets of bus companies. Incidentally, reverting to a point I made earlier, there is the strongest possible argument at this time for spending more and more money on public transport, if only as a fuel-saving measure.
Local authorities are having severely to curtail many services. My right hon. Friend the Chancellor said that a shift of resources into exports and investment was the first priority in economic management. The dilemma to which I am seeking to draw attention is that the shift into manufacturing investment, if it takes place, will increasingly replace labour in

manufacturing investment, labour which could be most usefully redeployed in various forms of public service. Yet that investment is to be financed partially at the expense of this same public service.
The Budget, as a short-term, first-aid operation to save jobs this winter, may be welcome, but some of the longer-term implications are more questionable. Sooner or later we must face the fact that the equation that more investment in industry equals more jobs in industry no longer holds.
The case for the National Enterprise Board, planning agreements and public ownership is intended not only to encourage useful investment but to control that investment in such a way that the inevitable effects on employment are turned to the good of the individual and of the community alike.
The case for expanding public service spending is based not only on obvious reasons but also on the need to provide more job opportunities, and, I hope, more satisfying job opportunities. I am prepared to accept that we may need first-aid now. But we also need radical rethinking for the future.

9 p.m.

Mr. Michael Heseltine: I want first to join the universal tributes to the hon. Member for Hemel Hempstead (Mr. Corbett) for his maiden speech which, justifiably, has earned praise from the whole House. Having listened to his forceful eloquence I should not want to be associated with the Commission for the New Towns in his constituency if I were likely to be subjected to that sort of battering. We all look forward to hearing him again in the near future.
The Chancellor of the Exchequer found no dissent in the House when he began his Budget speech by saying that it was probably the hardest speech of its sort that any Chancellor of the Exchequer had had to deliver in this House in recent years and probably in the political lifetime of anyone in the House. That was the subject of no dispute.
The question which the Opposition have raised, I believe correctly, is the extent to which the right hon. Gentleman and the judgments that he made in his two earlier Budgets must be called to account for the actions which he has now had to take.
Listening to what the right hon. Gentleman said I took the view that much of the justification for the Budget proposals now before us was contained in his opening words in which he referred to the different status in which he found himself and which saw him transferred from a Chancellor of the Exchequer in a minority Government facing an early election to a Chancellor of the Exchequer in a Government looking forward to a rather longer period in office.
Considering the judgments which the right hon. Gentleman has reached I think that this House and commentators outside it will have learned the lesson which the right hon. Gentleman spelt out for us, that many of the actions that he has now had to take he ought to have taken and knew that he ought to have taken earlier if he had not been trapped in the constraints of an electioneering Parliament which made it impossible and unpalatable to confront people with the realities with which, in small part, he has presented them in the past two days. Therefore, the question is the extent to which the situation has deteriorated in these past eight months and the extent to which he has been responsible for the deterioration.
The right hon. Gentleman may question it, but in my view there is no doubt that in the first of his three Budgets, in one way or another, he imposed costs on the corporate sector of the British economy of the order of £1·5 billion in the form of increased corporation tax, advance corporation tax, increases in nationalised industry prices and insurance contribution increases. Shortly afterwards, we had a toughening of the Price Code.
No one can have been surprised that these measures led to the damaging of corporate profits and the erosion of corporate liquidity. When all that is coupled with the language associated with the Secretary of State for Industry, with the regeneration of British industry and with the Green Paper that preceded it, it is not difficult to find reasons why not only profitability and liquidity were damaged but, what is even more critical, that confidence was destroyed.
My right hon. Friend the Member for Farnham (Mr. Macmillan) made the point vigorously, but it is within the memories

of us all that the Chancellor of the Exchequer was warned of the consequences of what he did at the time that he did it. It is on record in his own words, because the right hon. Gentleman said on 1st April 1974 that he could see no reason why the mass of British industry should find itself short of money this coming year. That places beyond a shadow of doubt the warning that he was given, and the right hon. Gentleman ignored it. On that first and critical subject the Chancellor of the Exchequer bears a responsibility for the decisions that have had to be made in this Budget.
The case put to the House by the Chancellor of the Exchequer is one with which not only this economy but the economy of the entire world is familiar. The grave severity of the crisis has been described in great detail and in all its manifestations by hon. Member on both sides of the House. No one has any inclination to question the severity of the immediate and medium-term future for us all.
The second area of the Budget for which the Chancellor bears a responsibility is the way in which he sought to present the crisis in the period between his first election to his office and the result of the recent General Election being declared. I cannot tell the House that the right hon. Gentleman never said there was a crisis. I cannot tell the House that the right hon. Gentleman did not refer to many of the manifestations of that crisis. The dilemma was that there was no quotation, from any side of the problem, favourable or pessimistic, which, at some time, on some occasion, the Chancellor of the Exchequer did not use, and it is the fact that on any occasion the right hon. Gentleman had a different version of the truth, and that that has led to the confusion in the public mind about the degree of crisis that exists.
Nobody, when he looks back on this crisis—and let us be clear that we are not in a position to do other than look forward to it at the moment—will forget the words of the Chancellor when he sought to persuade the British people that the crisis was of such an order of magnitude that inflation was currently running at 8·4 per cent., or, perhaps even more serious, when he was able to say on 26th September that, in the past six months, on the balance of payments, on growth and on


inflation our record had been improving and not deteriorating. No one in Britain can have had any doubt that those words were intended to tone down public awareness of the severity of the crisis that we shall have to face, and for that determined attempt to allay public anxiety the Chancellor bears a heavy and personal responsibility.
That is one psychological background against which the Chancellor has introduced his Budget, and my own feeling, having listened to the arguments, and having read much of the comment, is that probably the greatest single failure of the Chancellor of the Exchequer in presenting the Budget is in not bringing home to the men and women of Britain the exact dimension and depth of the crisis facing us.
I think it must frankly be said that the word "crisis" has been much overused. There is no political event of little significance, that is not, in someone's language, described as a crisis. We have all done it. The reality is that the public have heard us use the word year in and year out about issue after issue. Reference to a "crisis" in a debate in the House, or on a political platform, or even through the media, does not have the necessary impact on the British people and make them understand what all of us know to be the reality, namely, that there is coming an economic crisis that will transcend anything that we have experienced in contemporary life. The psychological background and approach of the Chancellor in presenting the Budget will be seen to have been one of the right hon. Gentleman's major misjudgments.
The Budget has to be coupled with the Queen's Speech because that, too, as we said at the time, could have been made by any Labour Government in any circumstances, in good times or in bad. In many ways, for all the impact that it had on the public, our criticism of the Queen's Speech applies to the Budget.
I hope that the Chancellor will tonight give the British people the full picture in language which means something in their ordinary lives and judgments. I hope that he will tell us exactly what price increases are to come from the nationalised industries and what sort of increases in the RPI we are to expect over the next

few years. I hope that he will tell us what he thinks tolerable wage awards should be in industry today and what levels of unemployment are likely to result from the judgments which he and his colleagues have been forced to take.
If the right hon. Gentleman does not tell us these figures, as I fear he will not, the language within which he has tried to communicate the crisis which has dominated the headlines for one or two days will have gone. Instead, out will come a dribble of statistics—price increases here, changes in situations there—each one of which will be judged on its own, and not in the context of the crisis which faces the country. That will not make it easier for the British people to get to grips with the dimension of sacrifice which we will be expecting. It was the Sun newspaper which referred to the "time bomb" of crisis which the Chancellor has placed underneath us. We would be better prepared and more likely to respond if we were warned of the explosions and their nature in advance, rather than have to watch them going off in small bursts on a continuing basis.
The second judgment that the Chancellor has brought to this Budget is about its impact on industry. The first question I want to ask is in what way the Chancellor disagrees with the CBI's detailed and published calculations of the impact of economic changes on corporate liquidity and profitability over the last year or so. If the Chancellor disagrees with the CBI's claims that the deficiency will be of the order of £2,500 million in 1974–75 and £3,500 million in 1975–76 I do not know how we can give back to the CBI figures, on my calculations, of only about £1,000 million in each of those years without being prepared to tell them where they are wrong.
It would be credible if he argued upon figures. Simply to say "This is what I am prepared to do regardless of the validity of the thinking behind my judgment" is inadequate in the real dilemmas which face the British corporate situation. So there has been no explanation.
Another aspect of this judgment is the impact of the Chancellor's concessions on the companies themselves. We all realise that to try to make a hasty judgment of the precise effects of the amelioration in the Price Code, and of the tax holiday that he has given on stock appreciation,


might be to misjudge the more sophisticated impact, but already the judgments are that he has done nothing like enough to bring back confidence and even the prospect of investment to British industry.
It must be clearly put on the record that the figure of £1,600 million which, according to some commentators, the Chancellor claims that he has given back to industry, has to be divided into two categories. There is, first, about £800 million of deferred taxation, which is in no way a return to industry of its cash but merely a balance sheet deferral of the liability. Companies which seek to borrow will find that that deferral will be regarded by the people from whom they seek to borrow as a real liability unless the Government can make it clear that it will not be so treated. Secondly, there is the possibility that prices will rise by some £800 million and, therefore, improve the cash resources of industry. I do not know—no one can know—whether in fact prices will be able to rise by that £800 million in the light of the market conditions which now prevail, and increasingly will prevail in this country, but even if we accept the figure of £800 million there are important areas in which that figure itself will be eroded.
First of all, we know that the increases in the cost of living—the retail price index—will be, over the course of the next 12 months, as a result of this Budget, about 4 per cent. Perhaps the Chancellor will tell us exactly. He has not told us. He has told us about the effect of the petrol price increase and something of the effect of the Price Code, but he has not told us about the nationalised industries' increased prices, or about rates, school meals and social security. The figure must be about four points on the RPI. That is what we can expect as a consequence of this Budget.
The effect of that will be to increase the wage demands which will follow because, as has been made perfectly clear, under the social contract wage demands follow price increases. Even under the revised code it is possible for industry to pass on only 80 per cent. of the increased costs through wages which will follow, so there is immediately a drag of 20 per cent. in the increases which will come from the Budget. This will have the effect of decreasing the £800 million that

has been granted in the possibility of price increases. That is an ongoing situation.
The productivity deduction will not only affect the immediate grant of extra liquidity to companies, but it has, in some ways, an aspect about it which now calls the whole project into question. That is that if we are to see wage increases of the order of magnitude of 20 per cent., or somehing of that sort, over the next 12 months, that means that 16 per cent. of that will be passed on to the public in price increases and 4 per cent. will be met by the companies' productivity deduction. The money that the companies should have earned and retained from the productivity deduction for future investment and for the development of industry will have to be used, to the extent that I have outlined, in meeting the wage increases which, in part, will be created by this Budget. So there is a further deduction which could be of about £800 million if we were to see something like a 20 per cent. increase in wages in this country next year.
The third aspect of the Budget is the strategy that we should now switch to exports and to investment. Here again, I believe that it is very possible that the Chancellor has got the judgments wrong. He has certainly been more modest in his claims for exports than the OECD. He thinks that there will be a 5 per cent. increase in world trade, whereas the OECD talks in terms of 8 per cent. Against that one has got to see that those figures which relate to the overall world trading position must be put in the context of what British exporters think will happen to their prospects for growing world trade. The fact is that in the last few days we have seen the publication of the CBI figures, which show that British exporters believe, in reality, that their prospects of earning more overseas next year are worse than they have ever been since those sorts of figures were recorded.
Although no one would want to take one month's figures as in any way indicative of long-term trends what we must not lose sight of is the fact that exports have been price-led and not volume-led in recent months. So there are serious anxieties about suggesting that, simply because it is laid down by decree in the


Budget that there shall be export switching we shall find the markets upon which the Chancellor is judging.
The second aspect of this third strategy is the diversion to investment. It is all very well for the Chancellor to say to British industry "I want to switch resources to investment." There is no one who would question the objective, but what will make British industry invest more in present circumstances? In the private sector, which is the most important sector for the purposes of my argument, there is only one motivating factor—the prospect of profitability, the prospect that people will earn a return on their investment and be allowed to keep it.
Here, too, the realities are frightening. Both in the Red Book and in the Government's figures on forward investment, published, conveniently, three days before the election, there was a degree of optimism. The CBI figures show deep and growing pessimism. Simply to say "Let there be investment" as if that will be enough to produce it is to misunderstand the fundamental nature of the capitalist system in this country. It is ludicrous to believe that industry, sitting there short of cash, is anxious to invest and that all that needs to be done is for it to be told to invest and all will be well. Industry is frightened because it cannot see where profits are coming from—[Interruption.]—Labour Members will not be laughing so loud in the months that lie ahead because the jobs of their constituents are at stake in this dialogue, and before they laugh they should listen to the Chancellor of the Duchy of Lancaster who spelled out the prospects this afternoon in a way that I could not improve upon.
Let me remind the House, since the Chancellor of the Duchy will not get another chance to speak, what the right hon. Gentleman said. His words should be heard more clearly than they were. He said that employment is at stake, that investment is at stake and that the situation of the Stock Exchange is now hopeless and must be rectified. That is the fundamental dilemma that faces the Labour Party now that it is entrusted with the management of the economy. If there are to be insufficient opportunities to earn profit and, therefore, attract investment

there is only one alternative way of dealing with the situation, and that is by a proliferation of the weapons of State intervention in industry—total nationalisation, partial nationalisation and the National Enterprise Board, or, in part, perhaps even attempts to recycle some of the investment funds through the FFI scheme.
The Chancellor made a most profound observation when he said that one of the biggest shocks he had had since being in Government had been to find the total lack of sophistication in Whitehall to deal with the problems of managing an economy of this complexity. Would it not be more appropriate for him, instead of embarking upon a programme of extensive nationalisation and further encroachment of State ownership, to devote his attention to improving the machinery for managing the public sector than to extend that sector? That would be an appropriate way to divert the energies of the Secretary of State for Industry, a way that could be profitable to the Government and to the country.
We are, however, faced with the prospect of increasing nationalisation. How much finance is allowed in the Budget for that? Why cannot the Chancellor explain the implications of the cost of nationalising the shipbuilding and aircraft manufacturing industries? How much will he make available for the National Enterprise Board to come to the rescue of companies which are in the liquidity situation he so eloquently described? How much money is involved? When Labour Members hear of the sums necessary they will realise how totally inadequate these proposals will be to bring about the regeneration of industry which is necessary and which is alluded to in the documents but which is totally outside the realms of anything the Government will be able to achieve.
The reality is that we probably have the worst of both worlds—a partly capitalist system without a capital market and a partly Socialist system run by a Government who admit that they have not the skill to do it.
If the large companies are in trouble, the small companies are in even greater trouble, because they have not the reserves or the resources to match up to the crisis with which they are confronted. There are 1½ million people employed in


the small companies; 25 per cent. of the national employment is centred upon them, and they produce 20 per cent. of the gross national product. The rate of bankruptcy in them, which is one measurement of the problems confronting them, is now about 35 per cent. higher than it was a year ago.
What has the Chancellor of the Exchequer done for the small companies? He has promised them what he fondly refers to as a bankable assurance, and nothing else. Therefore, people who have had to face rate increases of about 100 per cent., who have been told that there are no administrative methods by which their stock problems can be recognised and who have had to face the proposed increases in national insurance contributions are left with nothing more than vague assurances of something to be delivered at an imprecise time, something that will do nothing to maintain their ability to preserve employment and to get on with trying to do the things their businesses are designed to do, particularly in agriculture and building and in the small shopkeeping sector.
If there is one underlying anxiety about the Budget it is about the lack of precision about the whole question of the social contract. Underlying all the Chancellor's assumptions is the question of the country's ability to come to grips with the rate of inflation, a rate which the Prime Minister has said—so we do not need to question it—is now dependent on the rate of wage increases being negotiated and settled throughout the country. We are told that there is no way in which the country can expect to overcome its problems except through the guidelines of the social contract. The social contract is the basic strategy upon which the Budget and all the Government's policies depend.
Therefore, it is a matter of concern to hon. Members that there has never been an instrument of government so divorced from parliamentary control and answerability. There has never been an opportunity for hon. Members to debate the social contract. If they ask for details they are referred to two Labour Party documents in the Library. If they ask whether the social contract is succeeding they are told that it is not the job of Ministers to monitor it.
If there is one reason why the Budget will be seen to have failed, it is that the social contract is now the excuse within which the largest wage explosion in our history is being carried on without any attempts to bring it under control.

9.29 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey): We have had an exceptional number of good maiden speeches in the debate. I should like to mention in particular the two we have heard today. I refer first to that of my hon. Friend the Member for Hemel Hempstead (Mr. Corbett), who concentrated on an issue that is likely to dominate our thinking increasingly over the coming years, the question of waste in our economy. We look forward to hearing my hon. Friend many more times as the weeks pass.
I congratulate, too, the right hon. Member for Finchley (Mrs. Thatcher), who in a sense also made a maiden speech this afternoon. I hope I do not embarrass the right hon. Lady by saying that I found her speech witty, good-humoured, weighty and penetrating, and I look forward to crossing swords with her many times in the years to come.
I referred in my speech to the unreliability of forecasts, but I am glad to say that I am an exception. I forecast on Tuesday that I would not satisfy anybody completely. I was 100 per cent. right at least in that.
Much of our debate has focused on measures for improving the financial position of companies. I have been attacked on the one hand for giving companies too much or giving it in the wrong way and on the other hand for not giving them enough. I must confess that I feel that if I stand somewhere midway between Mr. Campbell Adamson and my hon. Friend the Member for Tottenham (Mr. Atkinson) I am probably just about right.
I wish to deal with some of the questions which have been raised on both sides of the House about the assistance I am giving in the Budget to the company sector. First of all let me deal with the reason. The reason is stark and simple: it is to protect jobs this winter. Over seven out of 10 men and women who work in Britain work in the private sector, and unless I were giving help urgently in this Budget there would be a real danger of many of those seven men and


women being laid off, being made redundant, with the firms they work for becoming bankrupt or cutting output. Nobody in the House has attempted to dispute the reality of that danger.
Some Opposition Members have attempted to make out that the difficulties have all been caused by the measures I took in March. But the total burden I then imposed on companies was just over £400 million—£100 million in increased corporation tax and ACT and over £300 million in the surcharge on ACT. The increases in national insurance contributions and nationalised industry prices have never been disputed on either side of the House and were in any case passed on in prices. They were allowable costs under the Price Code. In other words, the additional burden imposed on industry in my March Budget was only about 10 per cent. of what the CBI claims the total financial deficit of the company sector is likely to be in the present year.
I did not change those decisions which I took in March, first because the present rates of company taxation in Britain are broadly in line with those of our main competitors overseas—the United States, France and Germany; secondly, because cuts in corporation tax would give business relief only over the next two years and business needs relief now; thirdly, because I do not believe, as I made clear on Tuesday, in giving indiscriminate relief through tax cuts above the board and taking no account of the specific needs of the firms concerned; and finally because increasing the amount of investment is one of my basic purposes and any reduction in the rate of corporation tax reduces the value as an incentive of tax allowances offered for investment.
I chose relief on stock appreciation because it is simple and immediate and is directly related to one important element of the problem. I recognised that it was not possible to carry out immediate relief to cover companies with closing stocks below £25,000 in value. [HON. MEMBERS: "Why?"] The reason I explained on Tuesday, but I will explain it again because the right hon. Lady asked me questions about it. The fact is that we want relief made available in the next few months. As the right hon. Lady fairly admitted, although some of the

facts required to calculate the value el these reliefs are available in normal revenue returns, it would require many thousands more persons working in the Revenue to pay out those moneys in the next few months. There is no possibility whatever of recruiting staff of the quality and in the numbers required in time to make these payments quickly.
What I can say is what my right hon. Friend the Chancellor of the Duchy of Lancaster said today. I have given an absolute assurance that companies which are not covered by this winter's reliefs will receive double relief next year, with something to compensate for the fact that they have had to wait for the first year's relief. The amount of relief to which they arc due will be easily calculable by their accountants, and I shall do everything in my power to ensure that it is taken into account by all concerned, including their bankers. I can go no further on that.
I want to say something about what I have done about the Price Code. I have not abolished the productivity deduction altogether, because that is an essential element in price control and also an essential element in the social contract, since it enables the Government to maintain some discipline over wage settlements in the private sector. Moreover, as the right hon. Member for Finchley made clear, even if it had been totally abolished many companies might have been unable to take advantage of this fact by raising prices, either because of the competition to which they are being subjected or because of consumer resistance.
Therefore, as my right hon. Friend the Secretary of State for Prices and Consumer Protection made clear yesterday, I related the reliefs under the Price Code as nearly as possible, given the nature of the code, in some cases to the amount of labour employed and in other cases to the amount of investment carried out, an amount which will be monitored steadily throughout the year.
I told the House frankly on Tuesday that the adjustments which I have proposed in the Price Code, which will be fully debated at a later stage, will add about 1 per cent. to the retail price index compared with what would happen if current profit margins were maintained. I believe, however, that the majority of


working people in Britain will be prepared to pay that extra penny in the pound out of their weekly earnings rather than live on the dole, which for many of them would have been the only alternative.
Secondly, as we have made clear, increases in the retail price index will be taken into account in wage settlements under the social contract, a point to which the hon. Member for Henley (Mr. Heseltine) paid some attention.
The total help available to companies under these two measures will be about £1.5 billion. Half of that will be immediate help in liquidity—that is, the relief on stock appreciation—and half will be an increase in profitability over the next 12 months.
But some say that that is not enough. The hon. Member for Henley quoted the statement by the CBI. I have been in discussion with the CBI on this matter for many weeks. I have been given many different figures by the CBI—for example, for the size of the company deficit—but whereas the CBI spokesman was reported yesterday in the Evening Standard as saying that I am giving only half of what is needed, the chairman of the CBI taxation committee, Mr. Douglas Morpeth, a distinguished accountant well known to many of us, said that I was giving two-thirds, and he confirmed what I had said, that the companies will get £800 million through the Price Code changes and £800 million through the changes in corporation tax. I hope that in time other members of the CBI Council will take the opportunity to talk to their accountants, when they will find that what Mr. Morpeth tells them is the truth.
It may well be that this sum will not cover the whole of the company deficit. I believe that companies can cover and finance the remainder. I believe that they should be required to do so at this time of national difficulty.
I have given companies an immense new source of financial assistance by approving the Governor of the Bank of England's efforts in extending the resources of Finance for Industry. We hope to be able to lend to productive industries about £1,000 million over the next two years. I must make it clear that

these funds, and the organisation Finance for Industry through which they are collected and dispersed, will be entirely private. There will be no Government contribution to those funds and there will be no Government guarantee. As my right hon. Friend made clear, this new facility is a shift in lending from short term to medium term. That is vital if manufacturing industry is to be able to increase its investment plan.
The main sources of the new funds for Finance for Industry will be insurance companies and pension funds. In the past they have invested far too much of their money in the financial sector or in property. As matters finally turned out, that was much to their disadvantage. I have always felt that it should be an objective of a Labour Government to ensure that these immense sums were more readily available for investment in productive industry. That is the purpose and intention—and I believe it will be the achievement—of this expansion in Finance for Industry. I believe that it will be strongly in the interests of the financial institutions themselves.
My hon. Friend the Member for Greenwich (Mr. Barnett) and the right hon. Member for Finchley asked me about the interests of the beneficiaries of the pension funds and insurance companies. They asked about the security of any borrowings that might be made. The security of the contributions advanced by insurance companies and pension funds will be on a debenture or loans stock basis. Only the collapse of the FFI would place them at risk. Risks associated with individual investments are borne by the equity shareholders of FFI—namely, clearing banks and the Bank of England.
The shareholders will subscribe additional equity capital as necessary to match the expansion of business. That does not involve a call on public money money.

Mr. James Prior: Anything to liven up the proceedings. Will the right hon. Gentleman comment on the statement of the Secretary of State for Prices and Consumer Protection about the penalties for companies which pay out more money than the social contract allows in wage increases? Will he give one example of where a company has done that?

Mr. Healey: I can give such an example—namely, the ICI settlement in the north of England not so long ago. Further examples are the many settlements made by the clearing banks and some insurance companies during the summer. My right hon. Friend was extremely careful in making it clear that the thirteenth paragraph of the consultative document indicated that the Government would be prepared to consider an alternative approach if it proved acceptable to both sides of industry. I suggest that the right hon. Member for Lowestoft (Mr. Prior), whom I do not think has attended any other part of the debate, reads what my right hon. Friend said yesterday. In particular, I suggest that he reads the consultative documents to which she was referring.
I now resume my even tenor. The provision of new funds for lending to productive industry through FFI in no way pre-empts any decision which may be made when the National Enterprise Board has been set up to make public money available, to provide money to industry and to insist on returns from industry in the form of disclosure, or for public money to have a share in the equity capital or the other returns which are listed in the White Paper "The Regeneration of Industry". The steps which I have announced in the Budget are designed to creates an environment in which firms which employ seven out of 10 of all men and women in this country can continue to offer them work, to increase their productivity and thereby increase their wages.

Mr. Gorst: As regards the FFI, can the right hon. Gentleman give an undertaking that firms which make an investment will not be subject to later tampering or take-over by the NEB?

Mr. Healey: Of course, I cannot give any assurance of that nature. I do not think any member of the present Opposition Front Bench could have given an assurance in 1970 that they would not be taking over Rolls-Royce within 12 months.
I now pass to another major area which has been discussed on both sides of the House—the increase in nationalised industry prices which will be required to eliminate price subsidies in

the nationalised industries. The right hon. Member for Carshalton (Mr. Carr) and the right hon. Lady the Member for Finchley asked me why I have not given a detailed list. Let me make clear why this is. First, it is not proposed to make this adjustment, painful and disagreeable as it will be, in one step. I know the right hon. Lady conceded that this would be unwise and, indeed, impossible. We certainly proposed to complete the process within the four years of which I was speaking, and I hope that we can complete it a good deal sooner.
My hon. Friend the Member for Greenwich asked me whether we were likely to embark on this new path before pensions and other benefits were uprated in April. The answer is "No". But some particular increases are likely to take place before then, particularly one in gas in the New Year and one in domestic electricity charges which will be required to be passed on to take account of the increase in fuel costs which have already occurred. But these increases have yet to be demanded by the industries themselves and will be subject to agreement by the Price Commission.
I was asked by the right hon. Lady why, if I could list increases in March, I cannot do it now. I will tell her. The reason is that when we entered office in March I found in my "in" tray a whole pile of applications from the nationalised industries for price increases, which had been piling up for weeks and in some cases for months, since before the election. One of the most urgent steps was to decide what was to be done. No applications of that nature are now pending. We shall be getting them in the light of the movement of labour and industrial costs and we shall decide how to phase them in the light of our general responsibility to the country and to the economy.
I have made it quite clear that these increases will be substantial. But the Government regard it as their obligation under the social contract to help those who are worst off to cope with the consequences of these increases. Let me say that I hope that the Opposition, which welcomed the decision to increase these prices in principle, will not, as they did in the past eight months, attack every single one in practice for purely party purposes.
Let me now say a word about the main case mounted by the Opposition in the past three days. I will say nothing of the shrill and hysterical humbug which we had from the Leader of the Opposition on Tuesday evening in the fit of instant "aggro" to which he subjected the House, because we all know that he was under some strain. Never was a general deserted so fast, not only by his troops but by his divisional commanders too. The tone of the speeches by the right hon. Member for Carshalton, the hon. Member for Guildford (Mr. Howell), the right hon. Member for Finchley and even, God be praised, the hon. Member for Henley tonight, in their moderation and reasonableness presented an extraordinary and to me agreeable contrast with the graceless tone of the Leader of the Opposition's speech.
Although all the other Opposition speakers in the debate had this reasonable moderation in common, they had one other thing in common. While they have just emerged from a General Election which was fought on the very issues we have been discussing during the past three days, when they were purporting to present a policy which a Conservative Government might be able to carry out, we had no suggestion from any Opposition speaker of a total approach to the nation's problem, an approach which would reconcile the five key objectives I mentioned the other day—full employment, growth, social justice, stable prices and external confidence.
I must confess that, like many hon. Members, I was disappointed that we did not hear during this debate from some of those Tory Members who expressed their views during the General Election. The right hon. Member for Leeds, North-East (Sir K. Joseph), for example—[HON. MEMBERS: "Where is he?"]—pointed out during the election that, to quote from a letter he wrote to The Economist:
We had an historic high rate of inflation, an enfeebled economy, the worst relations with the trade union movement in decades and a lost Election with the greatest fall in our share of the vote since 1929. Surely"—
he asked, and he was addressing his Conservative friends in this question—
this was sufficient incentive to rethink.
Unfortunately we have had no example from him of his rethinking during the discussions in the past three days.
It is a pity that we have had no help from the hon. Member for St. Ives (Mr. Nott), who was Minister of State at the Treasury until the end of February this year. He reminded us the other day, outside this House, that when he joined the Treasury in early 1972
We were engaged on a constant struggle to hold back the growth in the money supply. But the die was cast. The Cabinet had already decided to run a massive Budget deficit and then was unwilling to allow the necessary rise in interest rates to finance the borrowing requirement.
How much our debates would have been enlightened in the past three days by a contribution from the hon. Member.
Unfortunately, the only coherent and comprehensive policy which was given to us did not come from the Opposition Front Bench. It came this evening in a remarkable speech from the right hon. Member for Down, South (Mr. Powell), who has clearly, if I may say so, in moving from London to Northern Ireland, also moved a long way from Chicago towards Cambridge in economics.
I was fascinated as the right hon. Gentleman spoke—I know that his hon. Friends will appreciate this—to observe the alert, vigilant intelligence with which his colleagues of the United Ulster Unionist Party watched him deliver a speech which, I hope I am right in inferring from what he said about his party's manifesto, they had actually written for him.
From the Opposition Front Bench, all we had was what I suppose one could call, in Britain as in the United States, the "old-time religion", a mish-mash of incompatible and half-understood ideas which led the Conservative Government through innumerable U turns into catastrophe at the beginning of this year.
The right hon. Member for Carshalton and the Leader of the Opposition told us that we must cut personal consumption, not maintain it. They said that we must not increase public expenditure but hold it fast. That would mean cutting £900 million a year off the expenditure plans published in the Conservative Government's expenditure White Paper which was referred to by the right hon. Member for Finchley. At the same time, however, they told us that we must not touch defence expenditure, which under Conservative plans, was to he increased by


£400 million in the next year. We were told that we must give industry all it asked for, which would add another £1,500 million to the public expenditure. We were told that we must help agriculture on a large scale, that we must help construction on a large scale, and that we must give all sorts of additional social security benefits. I was surprised that the right hon. Member for Finchley did not refer to her great triumph: that we must also hold mortgages at 9½ per cent. and cut the rates.
To carry out these policies without increasing total public expenditure would mean reducing other programmes by at least £3,000 million a year. Those cuts would have to come off schools and education, and investment for the future in our nationalised industries.
At the same time the Opposition Front Bench asked us to cut consumption, presumably by increasing prices or increasing personal taxation. The Opposition Front Bench in the debate have had nothing to offer the country but a return to the policies which failed so castastrophically last time they were tried and which led to the consequences described so accurately by the right hon. Member for Leeds, North-East in the letter from which I quoted. The last time a Government followed those policies they produced the worst inheritance an incoming Government have ever had to carry, the inheritance which faced us in March this year.
My Budget attempts to provide a basis for a return to solvency. I know that it will be unpopular, but I believe that it gives the nation a real chance not only of keeping on its feet in the present crisis but of enabling Britain for the first time since the war to move up in the international league table. On all those grounds I ask the House to approve it.

Question put and agreed to.

Resolved,
That a tax may be imposed on the value transferred by certain dispositions made on or after 26th March 1974 and on the value treated on death and in certain other circumstances as so transferred.

Mr. Speaker: I am now required, under Standing Order No. 94(2) to put successively without further debate the Question on each of the Ways and Means motions

numbers 2 to 19, on the two procedure motions and on the motion relating to Finance (Money), on all of which the Finance Bill is to be brought in. Instead of reading out each motion in extenso I propose to follow the procedure used in recent years; that is to say, I will first state the title of a motion and then put simply the Question "That the motion be agreed to."

2. DEATH DUTIES

Motion made, and Question,
That provision may be made for the abolition of estate duty under the law of Great Britain and Northern Ireland and, in relation to deaths occurring after 12th November 1974, for excluding or modifying certain reliefs and reducing the rates chargeable; for interest on sums paid in excess of those due in respect of duty; and for the final abolition of certain obsolete death duties.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

3. TAX ON CAPITAL GAINS

Motion made, and Question,
That provision may be made for amending the enactments relating to capital gains tax and corporation tax on chargeable gains—

(a) in connection with the replacement of certain provisions relating to estate duty by different provisions relating to capital transfer tax; and
(b)in relation to appeals.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

4. VALUE ADDED TAX (EIGHT PER CENT.
RATE)

Motion made, and Question,
That, as from 18th November 1974, section 9 of the Finance Act 1972 be amended as follows—

(a) in subsection (1), for the word 'ten' there shall be substituted the word 'eight'; and
(b) subsection (2) shall be omitted;


and that, in consequence of the amendment mentioned in paragraph (a) above, the Value Added Tax (Change of Rate) Order 1974 be revoked on that date.
And it is here by declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Halley.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

5. VALUE ADDED TAX (SPECIAL RATE FOR LIGHT HYDROCARBON OILS ETC.)

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):—
That, as from 18th November 1974, the rate of value added tax chargeable on the supply or importation of any light oil, petrol substitute or power methylated spirits (within the meaning of the Hydrocarbon Oil (Customs &amp; Excise) Act 1971) shall be 25 per cent., but nothing in this Resolution—
(a) shall affect the rate of value added tax chargeable on the supply or importation of light oil in containers of a capacity

not exceeding 20 fluid ounces, where the oil is intended for sale in those containers solely as fuel for mechanical lighters; or

(b) shall apply to any goods of a description for the time being specified in Schedule 4 to the Finance Act 1972 (zero-rating).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey]: —

The House divided: Ayes 302, Noes 44.

Division No. 7.]
AYES
[10.0 p.m.


Abse, Leo
Davis, S. Clinton (Hackney C)
Horam, John


Allaun, Frank
Deakins, Eric
Hoyle, Douglas (Nelson)


Anderson, Donald
Dean, Joseph (Leeds West)
Huckfield, Leslie


Archer, Peter
Delargy, Hugh
Hughes, Rt Hon C. (Anglesey)


Armstrong, Ernest
Dell, Rt Hon Edmund
Hughes, Mark (Durham)


Ashley, Jack
Dempsey, James
Hughes, Robert (Aberdeen N)


Ashton, Joe
Doig, Peter
Hughes, Roy (Newport)


Atkins, Ronald (Preston N.)
Dormand, Jack
Hunter, Adam


Atkinson, Norman
Douglas-Mann, Bruce
Irvine, Rt Hon Sir A. (L'pool)


Bagier, Gordon A. T.
Duffy, A. E. P.
Irving, Rt Hon S. (Dartford)


Barnett, Guy (Greenwich)
Dunn, James A.
Jackson, Colin (Brighouse)


Barnett, Joel (Heywood)
Dunnett, Jack
Jackson, Miss Margaret (Lincoln)


Bates, Alf
Dunwoody, Mrs. G. P.
Janner, Greville


Bean, Robert E.
Eadie, Alex
Jay, Rt Hon Douglas


Benn, Rt Hn Anthony Wedgwood
Edelman, Maurice
Jeger, Mrs Lena


Bennett, A. (Stockport North)
Edge, Geoffrey
Jenkins, Hugh (Wandsworth)


Bidwell, Sydney
Edwards, Robert (Wolv SE)
Jenkins, Rt Hon Roy (B'ham St)


Bishop, Edward
Ellis, John (Brigg &amp; Scun.)
John, Brynmor


Blenkinsop, Arthur
Ellis, Tom (Wrexham)
Johnson, James (Kingston W)


Boardman, H.
Ennals, David
Jones, Barry (East Flint)


Booth, Albert
Evans, Fred (Caerphilly)
Jones, Dan (Burnley)


Bottomley, Rt Hon Arthur
Evans, Ioan L. (Aberdare)
Jones, Alec (Rhondda)


Boyden, James (Bish Auck)
Evans, John (Newton)
Judd, Frank


Bradley, Tom
Ewing, Harry (Stirling)
Kaufman, Gerald


Bray, Dr Jeremy
Faulds, Andrew
Kelley, Richard


Broughton, Sir Alfred
Fernyhough, Rt Hon E.
Kerr, Russell


Brown, Hugh D. (Glasgow, Pr)
Fitch, Alan (Wigan)
Kilroy-Silk, Robert


Brown, Robert C. (Newcastle)
Fitt, Gerard (Belfast)
Kinnock, Neil


Brown, Ronald (Hackney S)
Flannery, Martin
Lambie, David


Buchan, Norman
Fletcher, Raymond (likeston)
Lamborn, Harry


Buchanan, Richard
Fletcher, Ted (Darlington)
Lamond, James


Butler, Mrs. Joyce (Haringey)
Foot, Rt Hon Michael
Latham, Arthur (Paddington)


Callaghan, Rt Hon J. (Cardiff S)
Ford, Ben T.
Leadbitter, Ted


Callaghan, Jim (Middleton &amp; P)
Forrester, John
Lee, John


Campbell, Ian
Fowler, Gerald (The Wrekin)
Lestor, Miss J. (Eton &amp; Slough)


Canavan, Dennis
Fraser, John (Lambeth N)
Lever, Rt Hn Harold


Cant, R. B.
Freeson, Reginald
Lewis, Arthur (Newham N.)


Carmichael, Neil
Garrett, John (Norwich S)
Lewis, Ron (Carlisle)


Carter, Ray
Garrett, W. (Wallsend)
Lipton, Marcus


Carter-Jones, Lewis
George, Bruce
Litterick, Tom


Cartwright, John
Gilbert, Dr John
Lomas, Kenneth


Castle, Rt Hon Barbara
Ginsburg, David
Loyden, Eddie


Clemitson, I. M.
Golding, John
Luard, Evan


Cocks, Michael (Bristol S)
Gould, Bryan
Lyons, Edward (Bradford W.)


Cohen, Stanley
Gourlay, Harry
McCartney, Hugh


Coleman, Donald
Graham, Ted
McElhone, Frank


Colquhoun, Mrs. Maureen
Grant, George (Morpeth)
McGuire, Michael (Ince)


Conlan, Bernard
Grant, John (Islington C.)
Mackenzie, Gregor


Cook, Robin F. (Edin. C.)
Grocott, Bruce
Mackintosh, John P.


Corbett, Robin
Hamilton, James (Bothwell)
Maclennan, Robert


Craigen, J. M. (Glasgow, M)
Hamilton, W. W. (Central Fife)
McMillan, Tom (Glasgow C.)


Crawshaw, Richard
Hamling, William
McNamara, Kevin


Cronin, John
Hardy, Peter
Madden, Max


Crosland, Rt Hon Anthony
Harper, Joseph
Magee, Bryan


Cryer, G. R.
Harrison, Walter (Wakefield)
Mahon, Simon


Cunningham, G. (Islington S)
Hart, Rt Hon Judith
Mallalieu, J. P. W.


Cunningham, Dr J. (Whiteh)
Hattersley, Roy
Marquand, David


Dalyell, Tam
Hatton, Frank
Marshall, Dr Edmund (Goole)


Davidson, Arthur
Hayman, Mrs. Helene
Marsha, Jim (Leicester S)


Davies, Bryan (Enfield N)
Healey, Rt Hon Denis
Mason, Rt Hon Roy


Davies, Denzil (Llanelli)
Heffer, Eric S.
Maynard, Miss Joan


Davies, Ifor (Gower)
Hooley, Frank
Meacher, Michael




Mellish, Rt Hon Robert
Roberts, Albert (Normanton)
Thomas, Ronald (Bristol NW)


Mendelson, John
Roberts, Gwilym (Cannock)
Thorne, S. G. (Preston)


Mikardo, Ian
Robertson, John (Paisley)
Tierney, Sydney


Millan, Bruce
Rodgers, George (Chorley)
Tinn, James


Miller, Dr M. (E. Kilbride)
Rodgers, William (Teesside)
Tomlinson, J.


Miller, Mrs Millie (Redbridge)
Rooker, J. W.
Tomney, Frank


Mitchell, R. C. (Soton, Itchen)
Roper, John
Torney, Tom


Molloy, William
Rose, Paul B.
Tuck, Raphael


Moonman, Eric
Ross, Rt Hon W. (Kilm'nock)
Urwin, T. W.


Morris, Alfred (Wythenshawe)
Rowlands, Ted
Varley, Rt Hon Eric G.


Morris, Charles R. (Openshaw)
Ryman, John
Wainwright, Edwin (Dearne V)


Morris, Rt Hon J. (Aberavon)
Sandelson, Neville
Walden, Brian (B'ham, L'dyw'd)


Moyle, Roland
Sedgemore, B.
Walker, Harold (Doncaster)


Mulley, Rt Hon Frederick
Selby, Harry
Walker, Terry (Kingswood)


Murray, Ronald King
Shaw, Arnold (Redbridge, Ilf)
Ward, M.


Newens, S.
Sheldon, R. (Ashton-u-Lyne)
Watkins, David


Noble, Mike
Shore, Rt Hon Peter
Watkinson, John


Oakes, Gordon
Short, Rt Hon E. (Newcastle C)
Weetch, Ken


Ogden, Eric
Short, Mrs R. (Wolv NE)
Weitzman, David


O'Halloran, Michael
Silkin, Rt Hn John (Lewish)
White, Frank (Bury)


O'Malley, Brian
Silkin, Rt Hn S. C. (Southwk)
White, James (Glasgow P)


Orbach, Maurice
Sillars, James
Whitehead, Phillip


Ovenden, J.
Silverman, Julius
Whitlock, William


Owen, Dr David
Skinner, Dennis
Willey, Rt Hon Frederick


Padley, Walter
Small, William
Williams, Alan (Swansea)


Palmer, Arthur
Smith, John (N Lanarkshire)
Williams, A. L. (Havering)


Park, G.
Snape, Peter
Williams, Rt Hn Mrs S. (Hertford)


Parker, John
Spearing, Nigel
Williams, W. T. (Warrington)


Parry, Robert
Spriggs, Leslie
Wilson, Alexander (Hamilton)


Peart, Rt Hon Fred
Stallard, A. W.
Wilson, Rt Hon H. (Huyton)


Pendry, Tom
Stoddart, David
Wilson, William (Coventry SE)


Perry, Ernest
Stonehouse, Rt Hn John
Wise, Mrs. Audrey


Phipps, Dr C.
Stott, Roger
Woodall, A.


Prentice, Rt Hon Reg
Strang, Gavin
Woof, Robert


Prescott, John
Strauss, Rt Hon G. R.
Wrigglesworth, Ian


Price, C. (Lewisham W.)
Summerskill, Hon Dr Shirley
Young, David (Bolton E)


Price, William (Rugby)
Swain, Thomas



Radice, Giles
Tayor, Mrs Ann (Boton W)
TELLERS FOR THE AYES: 


Rees, Rt Hon Merlyn (Leeds S)
Thomas, Jeffrey (Abertillery)
Mr. Thomas Cox and


Richardson, Miss Jo
Thomas, Mike (Newcaste)
 Mr. Walter Johnson.




NOES


Bain, Mrs Margaret
Henderson, Douglas
Ross, Stephen (Isle of Wight)


Boscawen, Hon Robert
Hicks, Robert
Smith, Cyril (Rochdale)


Clark, Alan (Plymouth S)
Hooson, Emlyn
Stewart, Donald (Western Isles)


Corrie, John
Howells, Geraint (Cardigan)
Taylor, Teddy (Glasgow, C)


Crawford, Dougas
Hutchison, Michael Clark
Thompson, George


Douglas-Hamilton, Lord James
Kellett-Bowman, Mrs. Elaine
Thorpe, Rt Hon Jeremy (Devon)


Evans, Gwynfor (Carmarthen)
Kilfedder, James
Wainwright, R. (Colne Valley)


Ewing, Mrs Winifred (Moray)
MacCormick, Iain
Watt, Hamish


Fairbairn, Nicholas
Maxwell-Hyslop, Robin
Welsh, Andrew


Fairgrieve, Russell
Mills, Peter
Wigley, Dafydd (Caernarvon)


Fell, Anthony
Monro, Hector
Wilson, Gordon (Dundee E)


Freud, Clement
Morgan, Geraint
Winterton, Nicholas


Fry, Peter
Mudd, David



Gilmour, Sir John (East Fife)
Pardoe, John
TELLERS FOR THE NOES: 


Gower, Sir Raymond (Barry)
Penhaligon, David
Mr. David Steel and


Gray, Hamish
Roberts, Wyn (Conway)
Mr. D. E. Thomas.


Grimond, Rt Hon J.

Question accordingly agreed to.

6. VALUE ADDED TAX (REFUNDS TO CERTAIN INTERNATIONAL ORGANISATIONS, DIPLOMATIC AGENTS AND CONSULAR OFFICERS ETC. IN RESPECT OF TAX ON HYDROCARBON OIL BOUGHT IN THE UNITED KINGDOM)

Motion made, and Question,
That it is expedient to make provision for securing that, in cases where, by virtue of section 8 of the Consular Relations Act 1968, Schedule 1 to the International Organisations Act 1968 or section 1 of the Diplomatic and Other Privileges Act 1971, arrangements exist

for securing the refund of customs duty paid on the importation of hydrocarbon oil, those arrangements may also make provision for the refund of value added tax becoming chargeable on that importation.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

7. VALUE ADDED TAX (REFUNDS TO
PERSONS CONSTRUCTING DWELLINGS OTHERWISE THAN IN THE COURSE OF A BUSINESS)

Motion made, and Question,
That it is expedient to make provision for
Government might be able to carry out


a dwelling otherwise than in the course of a business carried on by him of value added tax becoming chargeable, on or after 13th November 1974, on supplies to him and importation by him of goods which are incorporated in the dwelling or its site or in any garage intended to be occupied together with the dwelling and are of such a nature that, if he were a taxable person constructing the dwelling for the purpose of granting a major interest in it, within the meaning of section 5(6) of the Finance Act 1972, he would be entitled to deduct that value added tax as input tax.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

8. INCOME TAX (ALTERATION OF
ADDITIONAL RATES FOR 1974–75)

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):

That section 7(1) of the Finance Act 1974 (charge of income tax for 1974–75) shall have effect with the substitution for paragraph (b) of the following provisions, that is to say—

(b) in respect of so much of the investment income included in an individual's total income as exceeds £1,000 at the additional rates of 10 per cent. for the first £1,000 of the excess and 15 per cent. for the remainder;

except that, in the case of an individual who shows that, at any time within that year, his age or that of his wife living with him was sixty-five years or more, income tax at the additional rate of 10 per cent. shall not be charged in respect of the first £500 of the excess mentioned in paragraph (b) above.'.

And it is here by declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968. —[Mr. Healey.]

The House divided: Ayes 306, Noes 279.

Division No. 8.]
AYES
[10.13 p.m.


Abse, Leo
Cox, Thomas (Wands Toot)
Garrett, John (Norwich S)


Allaun, Frank
Craigen, J. M. (Glasgow, M)
Garrett, W. (Wallsend)


Anderson, Donald
Crawshaw, Richard
George, Bruce


Archer, Peter
Cronin, John
Gilbert, Dr John


Armstrong, Ernest
Crosland, Rt Hon Anthony
Ginsburg, David


Ashley, Jack
Cryer, G. R.
Golding, John


Ashton, Joe
Cunningham, G. (Islington S)
Gould, Bryan


Atkins, Ronald (Preston N.)
Cunningham, Dr J. (Whiteh)
Gourlay, Harry


Atkinson, Norman
Dalyell, Tam
Graham, Ted


Bagier, Gordon A. T.
Davidson, Arthur
Grant, George (Morpeth)


Barnett, Guy (Greenwich)
Davies, Bryan (Enfield N)
Grant, John (Islington C.)


Barnett, Joel (Heywood)
Davies, Denzil (Llanelli)
Grocott, Bruce


Bales, Alf
Davies, Ifor (Gower)
Hamilton, James (Bothwell)


Bean, Robert E.
Davis, S. Clinton (Hackney C)
Hamilton, W. W. (Central Fife)


Benn, Rt Hn Anthony Wedgwood
Deakins, Eric
Hamling, William


Bennett, A. (Stockport North)
Dean, Joseph (Leeds West)
Hardy, Peter


Bidwell, Sydney
Delargy, Hugh
Harrison, Walter (Wakefield)


Bishop, Edward
Dell, Rt Hon Edmund
Hart, Rt Hon Judith


Blenkinsop, Arthur
Dempsey, James
Hattersley, Roy


Boardman, H.
Doig, Peter
Hatton, Frank


Booth, Albert
Dormand, Jack
Hayman, Mrs Helene


Bottomley, Rt Hon Arthur
Douglas-Mann, Bruce
Healey, Rt Hon Denis


Boyden, James (Bish Auck)
Duffy, A. E. P.
Heffer, Eric S.


Bradley, Tom
Dunn, James A.
Hooley, Frank


Bray, Dr Jeremy
Dunnett, Jack
Horam, John


Broughton, Sir Alfred
Dunwoody, Mrs G. P.
Hoyle, Douglas (Nelson)


Brown, Hugh D (Glasgow, Pr)
Eadie, Alex
Huckfield, Leslie


Brown, Robert C. (Newcastle)
Edelman, Maurice
Hughes, Rt Hon C. (Anglesey)


Brown, Ronald (Hackney S)
Edge, Geoffrey
Hughes, Mark (Durham)


Buchan, Norman
Edwards, Robert (Wolv SE)
Hughes, Robert (Aberdeen N)


Buchanan, Richard
Ellis, Tom (Wrexham)
Hughes, Roy (Newport)


Butler, Mrs Joyce (Haringey)
Ennals, David
Hunter, Adam


Callaghan, Rt Hon J. (Cardiff S)
Evans, Fred (Caerphilly)
Irvine, Rt. Hon Sir A. (L'pool)


Callaghan, Jim (Middleton &amp; P)
Evans, Gwynfor (Carmarthen)
Irving, Rt Hon S. (Dartford)


Campbell, Ian
Evans, Ioan L. (Aberdare)
Jackson, Colin (Brighouse)


Canavan, Dennis
Evans, John (Newton)
Jackson, Miss Margaret (Lincoln)


Cant, R. B.
Ewing, Harry (Stirling)
Janner, Greville


Carmichael, Nell
Faulds, Andrew
Jay, Rt Hon Douglas


Carter, Ray
Fernyhough, Rt Hon E.
Jeger, Mrs Lena


Carter-Jones, Lewis
Fitch, Alan (Wigan)
Jenkins, Hugh (Wandsworth)


Cartwright, John
Fitt, Gerard (Belfast)
Jenkins, Rt Hon Roy (B'ham St)


Castle, Rt Hon Barbara
Flannery, Martin
John, Brynmor


Clemitson, I. M.
Fletcher, Raymond (Ilkeston)
Johnson, James (Kingston W)


Cocks, Michael (Bristol S)
Fletcher, Ted (Darlington)
Johnson, W. H. (Derby S)


Cohen, Stanley
Foot, Rt Hon Michael
Jones, Barry (East Flint)


Coleman, Donald
Ford, Ben T.
Jones, Dan (Burnley)


Colquhoun, Mrs Maureen
Forrester, John
Jones, Alec (Rhondda)


Conlan, Bernard
Fowler, Gerald (The Wrekin)
Judd, Frank


Cook, Robin F. (Edin. C.)
Fraser, John (Lambeth N)
Kaufman, Gerald


Corbett, Robin
Freeson, Reginald
Kelley, Richard




Kerr, Russell
Noble, Mike
Spriggs, Leslie


Kilroy-Silk, Rober
Oakes, Gordon
Stallard, A. W.


Kinnock, Neil
Ogden, Eric
Stoddart, David


Lambie, David
O'Halloran, Michael
Stonehouse, Rt Hn John


Lamborn, Harry
O'Malley, Brian
Stott, Roger


Lamond, James
Orbach, Maurice
Strang, Gavin


Latham, Arthur (Paddington)
Ovenden, J.
Strauss, Rt Hon G. R.


Leadbitter, Ted
Owen, Dr David
Summerskill, Hon Dr Shirley


Lee, John
Padley, Walter
Swain, Thomas


Lestor, Miss J. (Eton &amp; Slough)
Palmer, Arthur
Taylor, Mrs Ann (Bolton W)


Lever, Rt Hn Harold
Park, G.
Thomas, Dafydd (Merioneth)


Lewis, Arthur (Newham N.)
Parker, John
Thomas, Jeffrey (Abertillery)


Lewis, Ron (Carlisle)
Parry, Robert
Thomas, Mike (Newcastle)


Lipton, Marcus
Pearl, Rt Hon Fred
Thomas, Ron (Bristol NW)


Litterick, Tom
Pendry, Tom
Thorne, S. G. (Preston)


Lomas, Kenneth
Perry, Ernest
Tierney, Sydney


Loyden, Eddie
Phipps, Dr C.
Tinn, James


Luard, Evan
Prentice, Rt Hon Reg
Tomlinson, J.


Lyons, Edward (Bradford W.)
Prescott, John
Tomney, Frank


McCartney, Hugh
Price, C. (Lewisham W.)
Torney, Tom


McElhone, Frank
Price, William (Rugby)
Tuck, Raphael


McGuire, Michael (Ince)
Radice, Giles
Urwin, T. W.


Mackenzie, Gregor
Rees, Rt Hon Merlyn (Leeds S)
Varley, Rt Hon Eric G.


Mackintosh, John P.
Richardson, Miss Jo
Wainwright, Edwin (Dearne V)


Maclennan, Robert
Roberts, Albert (Normanton)
Walden, Brian (B'ham, L'dyw'd)


McMillan, Tom (Glasgow C.)
Roberts, Gwilym (Cannock)
Walker, Harold (Doncaster)


McNamara, Kevin
Robertson, John (Paisley)
Walker, Terry (Kingswood)


Madden, Max
Roderick, Caerwyn
Ward, Michael


Magee, Bryan
Rodgers, George (Chorley)
Watkins, David


Mahon, Simon
Rodgers, William (Teesside)
Watkinson, John


Mallalieu, J. P. W.
Rooker, J. W.
Weetch, Ken


Marquand, David
Roper, John
Weitzman, David


Marshall, Dr Edmund (Goole)
Rose, Paul B.
White, Frank R. (Bury)


Marshall, Jim (Leicester S)
Ross, Rt Hon W. (Kilm'nock)
White, James (Glasgow P)


Mason, Rt Hon Roy
Rowlands, Ted
Whitehead, Phillip


Maynard, Miss Joan
Ryman, John
Whitlock, William


Meacher, Michael
Sandelson, Neville
Wigley, Dafydd (Caernarvon)


Mellish, Rt Hon Robert
Sedgemore, B.
Willey, Rt Hon Frederick


Mendelson, John
Selby, Harry
Williams, Alan (Swansea)


Mikardo, Ian
Shaw, Arnold (Redbridge, Ilf)
Williams, A. L. (Havering)


Millan, Bruce
Sheldon, R. (Ashton-u-Lyne)
Williams, Rt Hn Mrs S. (Hertford)


Miller, Dr M. (E. Kilbride)
Shore, Rt Hon Peter
Williams, W. T. (Warrington)


Miller, Mrs Millie (Redbridge)
Short, Rt Hon E. (Newcastle C)
Wilson, Alexander (Hamilton)


Mitchell, R. C. (Soton, Itchen)
Short, Mrs R. (Wolv NE)
Wilson, Rt Hon H. (Huyton)


Molloy, William
Silkin, Rt Hn John (Lewish)
Wilson, William (Coventry SE)


Moonman, Eric
Silkin, Rt Hn S. C. (Southwk)
Wise, Mrs. Audrey


Morris, Alfred (Wythenshawe)
Sillars, James
Woodall, A.


Morris, Charles R. (Openshaw)
Silverman, Julius
Woof, Robert


Morris, Rt Hon J. (Aberavon)
Skinner, Dennis
Wrigglesworth, Ian


Moyle, Roland
Small, William
Young, David (Bolton E)


Mulley, Rt Hon Frederick
Smith, John (N Lanarkshire)



Murray, Ronald King
Snape, Peter
TELLERS FOR THE AYES:


Newens, S.
Spearing, Nigel
Mr. John Ellis and




Mr. Joseph Harper.




NOES


Adley, Robert
Buck, Antony
Douglas-Hamilton, Lord James


Aitken, J. W. P.
Budgen, N. W.
Drayson, Burnaby


Alison, Michael
Bulmer, J. E.
du Cann, Rt Hon Edward


Amery, Rt Hn Julian
Burden, F. A.
Dunlop, J.


Arnold, Tom
Carlisle, Mark
Durant, Tony


Atkins, Rt Hn H. (Spelthorne)
Carr, Rt Hon Robert
Eden, Rt Hon Sir John


Awdry, Daniel
Carson, John
Edwards, Nicholas (Pembroke)


Bain, Mrs Margaret
Chalker, Mrs Lynda
Elliott, Sir William


Baker, Kenneth
Churchill, W. S.
Emery, Peter


Banks, R. G.
Clark, Alan (Plymouth S)
Ewing, Mrs Winifred (Moray)


Bell, Ronald
Clark, William (Croydon S)
Eyre, Reginald


Bennett, Sir Frederic (Torbay)
Clarke, Kenneth (Rushcliffe)
Fairbairn, N.


Bennett. Dr Reginald (Fareham)
Clegg, Walter
Fairgrieve, Russell


Berry, Hon. Anthony
Cockcroft, J. H.
Fell, Anthony


Biffen, John
Cope, J. A.
Finsberg, Geoffrey


Biggs-Davison, John
Cordle, John
Fisher, Sir Nigel


Blaker, Peter
Cormack, Patrick
Fletcher, Alex (Edinburgh N)


Body, Richard
Corrie, John
Fletcher-Cooke, Charles


Boscawen, Hon Robert
Costain, A. P.
Fookes, Miss Janet


Bowden, Andrew (Brighton)
Craig, Rt Hon W. (Belfast)
Fowler, Norman (Sutton C)


Boyson, Dr Rhodes (Brent)
Crawford, Dougas
Fox, Marcus


Braine, Sir Bernard
Critchley, Julian
Fraser, Rt Hon H. (Stafford &amp; St)


Brittan. L.
Crouch, David
Freud, Clement


Brotherton, Michael
Crowder, F. P.
Fry, Peter


Brown, Sir Edward (Bath)
Davies, Rt Hon J. (Knutsford)
Galbraith, Hon T. G. D.


Bryan, Sir Paul
Dean, Paul (N Somerset)
Gardiner, George (Relgate)


Buchanan-Smith, Alick
Dodsworth, G. H.
Gardner, Edward (S Fylde)







Gilmour Rt Hon Ian (Chesham)
Lloyd, Ian (Havant)
Rippon, Rt Hon Geoffrey


Gilmour. Sir John (East File)
Loveridge, John
Roberts, Michael (Cardiff NW)


Glyn, Dr Alan
Luce, Richard
Roberts, Wyn (Conway)


Godber, Rt Hon J.
McAdden, Sir Stephen
Rodgers, Sir John (Sevenoaks)


Goodhew, Victor
MacCormick, Iain
Ross, Stephen (Isle of Wight)


Goodlad, A.
McCrindle, Robert
Ross, William (Londonderry)


Gorst, John
McCusker, Harold
Rossi Hugh (Hornsey)


Gow, I. (Eastbourne)
Macfarlane, Neil
Rost, Peter (S.E. Derbyshire)


Gower, Sir Raymond (Barry)
MacGregor, John
Royle, Sir Anthony


Grant, Anthony (Harrow C.)
Macmillan, Rt Hn M. (Farnham)
Sainsbury, Tim


Gray, Hamish
McNair-Wilson, M. (Newbury)
St. John-Stevas, Norman


Grieve, Percy
McNair-Wilson, P. (New Forest)
Shaw, Giles (Pudsey)


Griffiths, Eldon
Madel, David
Shelton, William (Lambeth, St)


Grimond, Rt Hon J.
Marshall, Michael (Arundel)
Shepherd, Colin


Grist, Ian
Marten, Neil
Shersby, Michael


Grylis, Michael
Mates, Michael
Silvester, F.


Hall, Sir John
Mather, Carol
Sims, Roger


Hall-Davis, A. G. F.
Maude, Angus
Sinclair, Sir George


Hamilton, Michael (Salisbury)
Mawby, Ray
Skeet, T. H. H.


Hampson, Dr. Keith
Maxwell-Hyslop, Robin
Smith, Cyril (Rochdale)


Hannam, John
Mayhew, Patrick
Smith, Dudley (Warwick)


Harrison, Sir Harwood (Eye)
Meyer, Sir Anthony
Speed, Keith


Harvie Anderson, Rt Hn Miss
Miller, Hal (Bromsgrove)
Spence, John


Hastings, Stephen
Mills, Peter
Spicer, James (W Dorset)


Havers, Sir Michael
Miscampbell, Norman
Spicer, Michael (S Worcester)


Hayhoe, Barney
Mitchell, David (Basingstoke)
Stainton Keith


Heath, Rt Hon Edward
Moate, Roger
Stanbrook, Ivor


Henderson, Douglas
Molyneaux, James
Stanley, John


Heseltine, Michael
Monro, Hector
Steel, David (Roxburgh)


Hicks, Robert
Montgomery, Fergus
Steen, Anthony (Liverpool)


Higgins, Terence L.
Moore, John (Croydon C.)
Stewart, Donald (Western Isles)


Holland, Philip
More, Jasper (Ludlow)
Stewart, Ian (Hitchin)


Hooson, Emlyn
Morgan, Geraint
Stokes, John


Hordern, Peter
Morris, Michael (Northants)
Tapsell, Peter


Howe, Rt Hon Sir Geoffrey
Morrison, Charles (Devizes)
Taylor, R. (Croydon N.W.)


Howell, David (Guildford)
Morrison, Peter (Chester)
Taylor, Teddy (Glasgow, C)


Howells, Geraint (Cardigan)
Mudd, David
Tebbit, Norman


Hunt, John
Neave, Airey
Temple-Morris, P.


Hurd, D.
Nelson, Anthony
Thatcher, Rt Hon M.


Hutchison, Michael Clark
Neubert, M.
Thomas, Rt Hon P. (Barnet)


Irvine, Bryant Godman (Rye)
Newton, A.
Thompson, George


Irving, Charles (Cheltenham)
Onslow, Cranley
Thorpe, Rt Hon Jeremy (Devon)


James, David
Oppenheim, Mrs Sally
Townsend, Cyril D.


Jenkin, Rt Hon Patrick (Redbr)
Osborn, John
Trotter, Neville


Jessel, Toby
Page, Rt Hon R. Graham (Crosby)
Tugendhat, Christopher


Johnson Smith, G.(E Grinstead)
Page, John (Harrow West)
van Straubenzee, W. R.


Jones, Arthur (Daventry)
Pardoe, John
Vaughan, Dr Gerard


Jopling, Michael
Parkinson, Cecil
Viggers, P. J.


Joseph, Rt Hon Sir Keith
Pattie, Geoffrey
Wainwright, R. (Colne Valley)


Kaberry, Sir Donald
Penhaligon, David
Wakeham, John


Kellett-Bowman, Mrs. Elaine
Percival, Ian
Walder David (Clitheroe)


Kershaw, Anthony
Peyton, Rt Hon John
Walker Rt Hon P. (Worcester)


Kilfedder, James
Pink, R. Bonner
Walters, Dennis


Kimball, Marcus
Powell, Rt Hon J. Enoch
Warren, Kenneth


King, Evelyn (South Dorset)
Price, David (Eastleigh)
Watt, Hamish


King, Tom (Bridgwater)
Prior, Rt Hon James
Weatherill, Bernard


Kitson, Sir Timothy
Pym, Rt Hon Francis
Wells, John


Knight, Mrs Jill
Raison, Timothy
Welsh, Andrew


Knox, David
Rathbone, T.
Whitelaw, Rt Hon William


Lamont, Norman
Rawlinson, Rt Hon Sir Peter
Wilson, Gordon (Dundee E)


Lane, David
Rees, Peter (Dover &amp; Deal)
Winterton, Nicholas


Langford-Holt, Sir John
Rees-Davies, W. R.
Wood, Rt Hon Richard


Latham, Michael (Melton)
Renton, Rt Hn Sir D. (Hunts)
Young, Sir George (Ealing)


Lawrence I.
Renton, Tim (Mid-Sussex)



Lawson, Nigel
Ridley, Hon Nicholas
TELLERS FOR THE NOES:


Le Marchant, Spencer
Ridsdale, Julian
Mr. Adam Butler and


Lester, Jim (Beeston)
Rifkind, Malcolm
Mr. John Stradling Thomas.


Lewis, Kenneth (Rutland)

Question accordingly agreed to.

9. BUILDING SOCIETIES

Motion made, and Question,
That provision may be made with respect to certain sums payable by building societies. —[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

10. LIFE POLICIES, LIFE ANNUITY CON TRACTS AND CAPITAL REDEMPTION POLICIES (INCOME TAX)

Motion made, and Question,
That charges to income tax may be imposed by provisions about—

(a) the surrender of rights under life policies, contracts for life annuities or capital redemption policies;
(b) the exercise of options conferred by such policies or contracts;


(c) the conversion of such policies into paid-up or partly paid-up policies; or
(d) matters treated under the provisions as matters equivalent to the surrender of such rights or to the exercise of such options;


and those provisions may extend to events happening at any time after 26th March 1974.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

11. EXTENDED TAX EXEMPTION FOR SAVINGS CERTIFICATES (INCOME TAX)

Motion made, and Question,
That provision may be made for extending the exemption relating to United Kingdom and Ulster savings certificates conferred by sections 95(1) and 96(1) of the Income and Corporation Taxes Act 1970.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

12. TRANSACTIONS BETWEEN ASSOCIATED PERSONS (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That charges to income tax and corporation tax (including charges for the year 1974–75 or for past accounting periods) may be imposed by further provisions about sales or other transactions at an undervalue or overvalue, and any Act of the present Session giving effect to this Resolution may contain provisions incidental or supplementary to the preceding provisions of this Resolution, including provisions about the obtaining of information.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

13. INITIAL ALLOWANCES FOR INDUSTRIAL BUILDINGS AND STRUCTURES, ETC. (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That provision may be made for increasing the amount of initial allowances under Chapter I of Part I of the Capital Allowances Act 1968 in relation to expenditure incurred after 12th November 1974.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

14. ALLOWANCES FOR EXPENDITURE ON THERMAL INSULATION (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That provision may be made for the making of allowances under Chapter I of Part III of the Finance Act 1971 in respect of expenditure incurred in adding to any industrial building or structure (as defined in section 7 of the Capital Allowances Act 1968) any insulation against loss of heat.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

15. TRADE UNIONS (INCOME TAX AND CORPORATION TAX)

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):—
That provision may be made for treating certain trade unions as having been registered trade unions within the meaning of section 338 of the Income and Corporation Taxes Act 1970 (exemption from tax of income and chargeable gains applicable and applied for the purpose of provident benefits). —[Mr. Healey]

The House divided: Ayes 306, Noes 268.

Division No. 9.]
AYES
[10.28 p.m.


Abse, Leo
Bray, Dr Jeremy
Conlan, Bernard


Allaun, Frank
Broughton, Sir Alfred
Cook, Robin F. (Edin. C.)


Anderson, Donald
Brown, Hugh D. (Glasgow, Pr)
Corbett, Robin


Archer, Peter
Brown, Robert C. (Newcastle)
Craigen, J. M. (Glasgow, M)


Armstrong, Ernest
Brown, Ronald (Hackney S)
Crawshaw, Richard


Ashley, Jack
Buchan, Norman
Cronin, John


Ashton, Joe
Buchanan, Richard
Crosland, Rt Hon Anthony


Atkins, Ronald (Preston N.)
Butler, Mrs Joyce (Haringey)
Cryer, G. R.


Atkinson, Norman
Callaghan, Rt Hon J. (Cardiff S)
Cunningham, G. (Islington S)


Bagier, Gordon A. T.
Callaghan, Jim (Middleton &amp; P)
Cunningham, Dr J. (Whiteh)


Barnett, Joel (Heywood)
Campbell, Ian
Dalyell, Tam


Bates Alf
Canavan, Dennis
Davidson, Arthur


Bean, Robert E.
Cant, R. B.
Davies, Bryan (Enfield N)


Benn, Rt Hn Anthony Wedgwood
Carmichael, Neil
Davies, Denzil (Llanelli)


Bennett, A. (Stockport North)
Carter, Ray
Davies, Ifor (Gower)


Bidwell, Sydney
Carter-Jones, Lewis
Davis, S. Clinton (Hackney C)


Bishop, Edward
Cartwright, John
Deakins, Eric


Blenkinsop, Arthur
Castle, Rt Hon Barbara
Dean, Joseph (Leeds West)


Boardman, H.
Clemitson, I. M.
Delargy, Hugh


Booth, Albert
Cocks, Michael (Bristol S)
Dell, Rt Hon Edmund


Bottomley, Rt Hon Arthur
Cohen, Stanley
Dempsey, James


Boyden, James (Bish Auck)
Coleman, Donald
Doig, Peter


Bradley, Tom
Colquhoun, Mrs Maureen
Dormand, Jack




Douglas-Mann, Bruce
Kerr, Russell
Roderick, Caerwyn


Duffy, A. E. P.
Kilroy-Silk, Robert
Rodgers, George (Chorley)


Dunn, James A.
Kinnock, Neil
Rodgers, William (Teesside)


Dunnett, Jack
Lambie, David
Rooker, J. W.


Dunwoody, Mrs G. P.
Lamborn, Harry
Roper, John


Eadie, Alex
Lamond, James
Rose, Paul B.


Edelman, Maurice
Latham, Arthur (Paddington)
Ross, Rt Hon W. (Kilm'nock)


Edge, Geoffrey
Leadbitter, Ted
Rowlands, Ted


Edwards, Robert (Wolv SE)
Lee, John
Ryman, John


Ellis, Tom (Wrexham)
Lestor, Miss J. (Eton &amp; Slough)
Sandelson, Neville


Ennals, David
Lever, Rt Hn Harold
Sedgemore, B.


Evans, Fred (Caerphilly)
Lewis, Arthur (Newham N.)
Selby, Harry


Evans, Gwynfor (Carmarthen)
Lewis, Ron (Carlisle)
Shaw, Arnold (Redbridge, Ilf)


Evans, Ioan L. (Aberdare)
Lipton, Marcus
Sheldon, R. (Ashton-u-Lyne)


Evans, John (Newton)
Litterick, Tom
Shore, Rt Hon Peter


Ewing, Harry (Stirling)
Lomas, Kenneth
Short, Rt Hon E. (Newcastle C)


Faulds, Andrew
Loyden, Eddie
Short, Mrs R. (Wolv NE)


Fernyhough, Rt Hon E.
Luard, Evan
Silkin, Rt Hn S. C. (Southwk)


Fitch, Alan (Wigan)
Lyons, Edward (Bradford W.)
Silkin, Rt Hn John (Lewish)


Fitt, Gerard (Belfast)
McCartney, Hugh
Sillars, James


Flannery, Martin
McElhone, Frank
Silverman, Julius


Fletcher, Raymond (Ilkeston)
McGuire, Michael (Ince)
Skinner, Dennis


Fletcher, Ted (Darlington)
Mackenzie, Gregor
Small, William


Foot, Rt Hon Michael
Mackintosh, John P.
Smith, John (N Lanarkshire)


Ford, Ben T.
Maclennan, Robert
Snape, Peter


Forrester, John
McMillan, Tom (Glasgow C.)
Spearing, Nigel


Fowler, Gerald (The Wrekin)
McNamara, Kevin
Spriggs, Leslie


Fraser, John (Lambeth N)
Madden, Max
Stallard, A. W.


Freeson, Reginald
Magee, Bryan
Stoddart, David


Garrett, John (Norwich S)
Mahon, Simon
Storehouse, Rt Hn John


Garrett, W. (Wallsend)
Malialieu, J. P. W.
Stott, Roger


George, Bruce
Marquand, David
Strang, Gavin


Gilbert, Dr John
Marshall, Dr Edmund (Goole)
Strauss, Rt Hon G. R.


Ginsburg, David
Marshall, Jim (Leicester S)
Summerskill, Hon Dr Shirley


Golding, John
Mason, Rt Hon Roy
Swain, Thomas


Gould, Bryan
Maynard, Miss Joan
Taylor, Mrs Ann (Bolton W)


Gourlay, Harry
Meacher, Michael
Thomas, Dafydd (Merioneth)


Graham, Ted
Mellish, Rt Hon Robert
Thomas, Jeffrey (Abertillery)


Grant, George (Morpeth)
Mendelson, John
Thomas, Mike (Newcastle)


Grant, John (Islington C.)
Mikardo, Ian
Thomas, Ron (Bristol NW)


Grocott, Bruce
Millan, Bruce
Thorne, S. G. (Preston)


Hamilton, James (Bothwell)
Miller, Dr M. (E. Kilbride)
Tierney, Sydney


Hamilton, w. W. (Central Fife)
Miller, Mrs Millie (Redbridge)
Tinn, James


Hamling, William
Mitchell, R. C. (Soton, Itchen)
Tomlinson, J.


Hardy, Peter
Molloy, William
Tomney, Frank


Harper, Joseph
Moonman, Eric
Torney, Tom


Harrison, Walter (Wakefield)
Morris, Alfred (Wythenshawe)
Tuck, Raphael


Hart, Rt Hon Judith
Morris, Charles R. (Openshaw)
Urwin, T. W.


Hattersley, Roy
Morris, Rt Hon J. (Aberavon)
Varley, Rt Hon Eric G.


Hatton, Frank
Moyle, Roland
Wainwright, Edwin (Dearne V)


Hayman, Mrs Helene
Mulley, Rt Hon Frederick
Walden, Brian (B'ham, L'dyw'd)


Healey, Rt Hon Denis
Murray, Ronald King
Walker, Harold (Doncaster)


Heffer, Eric S.
Newens, S.
Walker, Terry (Kingswood)


Hooley, Frank
Noble, Mike
Ward, Michael


Horam, John
Oakes, Gordon
Watkins, David


Hoyle, Douglas (Nelson)
Ogden, Eric
Watkinson, John


Huckfleld, Leslie
O'Halloran, Michael
Weetch, Ken


Hughes, Rt Hon C. (Anglesey)
O'Malley, Brian
Weitzman, David


Hughes, Mark (Durham)
Orbach, Maurice
White, Frank R. (Bury)


Hughes, Robert (Aberdeen N)
Ovenden, J.
White, James (Glasgow P)


Hughes, Roy (Newport)
Owen, Dr David
Whitehead, Phillip


Hunter, Adam
Padley, Walter
Whitlock, William


Irvine, Rt. Hon Sir A. (L'pool)
Palmer, Arthur
Wigley, Dafydd (Caernarvon)


Irving, Rt Hon S. (Dartford)
Park, G.
Willey, Rt Hon Frederick


Jackson, Colin (Brighouse)
Parker, John
Williams, Alan (Swansea)


Jackson, Miss Margaret (Lincoln)
Parry, Robert
Williams, Alan Lee (Havering)


Janner, Greville
Peart, Rt Hon Fred
Williams, Rt Hn Mrs S. (Hertford)


Jay, Rt Hon Douglas
Pendry, Tom
Williams, W. T. (Warrington)


Jeger, Mrs Lena
Perry, Ernest
Wilson, Alexander (Hamilton)


Jenkins, Hugh (Wandsworth)
Phipps, Dr C.
Wilson, Rt Hon H. (Huyton)


Jenkins, Rt Hon Roy (B'ham St)
Prentice, Rt Hon Reg
Wilson, William (Coventry SE)


John, Brynmor
Prescott, John
Wise, Mrs. Audrey


Johnson, James (Kingston W)
Price, C. (Lewisham W.)
Woodall, A.


Johnson, W. H. (Derby S)
Price, William (Rugby)
Woof, Robert


Jones, Barry (East Flint)
Radice, Giles
Wrigglesworth, Ian


Jones, Dan (Burnley)
Rees, Rt Hon Merlyn (Leeds S)
Young, David (Bolton E)


Jones, Alec (Rhondda)
Richardson, Miss Jo



Judd, Frank
Roberts, Albert (Normanton)
TELLERS FOR THE AYES:


Kaufman, Gerald
Roberts, Gwilym (Cannock)
Mr. Thomas Cox and


Kelley, Richard
Robertson, John (Paisley)
Mr. John Ellis 







NOES


Adley, Robert
Gorst, John
Mills, Peter


Aitken, J. W. P.
Gow, I. (Eastbourne)
Miscampbell, Norman


Alison, Michael
Gower, Sir Raymond (Barry)
Mitchell, David (Basingstoke)


Amery, Rt Hn Julian
Grant, Anthony (Harrow C.)
Moate, Roger


Arnold, Tom
Gray, Hamish
Molyneaux, James


Atkins, Rt Hn H. (Spelthorne)
Grieve, Percy
Monro, Hector


Awdry, Daniel
Griffiths, Eldon
Moore, John (Croydon C.)


Bain, Mrs Margaret
Grimond, Rt Hon J.
More, Jasper (Ludlow)


Baker, Kenneth
Grist, Ian
Morgan, Geraint


Banks, R. G.
Grylls, Michael
Morris, Michael (Northants)


Bell Ronald
Hall, Sir John
Morrison, Charles (Devizes)


Bennett, Sir Frederic (Torbay)
Hall-Davis, A. G. F.
Morrison, Peter (Chester)


Bennett, Dr Reginald (Fareham)
Hamilton, Michael (Salisbury)
Mudd, David


Berry, Hon. Anthony
Hampson, Dr. Keith
Neave, Airey


Biffen, John
Hannam, John
Nelson, Anthony


Biggs-Davison, John
Harrison, Sir Harwood (Eye)
Neubert, M.


Blaker, Peter
Harvie Anderson, Rt Hn Miss
Newton, A.


Body, Richard
Hastings, Stephen
Onslow, Cranley


Boscawen, Hon Robert
Havers, Sir Michael
Oppenheim, Mrs Sally


Bowden, Andrew (Brighton)
Hayhoe, Barney
Osborn, John


Boyson, Dr Rhodes (Brent)
Heath, Rt Hon Edward
Page, John (Harrow West)


Braine, Sir Bernard
Henderson, Douglas
Page, Rt Hon R. Graham (Crosby)


Brittan, L.
Heseltine, Michael
Pardoe, John


Brotherton, Michael
Hicks, Robert
Parkinson, Cecil


Brown, Sir Edward (Bath)
Higgins, Terence L.
Pattie, Geoffrey


Bryan, Sir Paul
Holland, Philip
Percival, Ian


Buchanan-Smith, Alick
Hooson, Emlyn
Peyton, Rt Hon John


Buck, Antony
Hordern, Peter
Pink, R. Bonner


Budgen, N. W.
Howe, Rt Hon Sir Geoffrey
Price, David (Eastleigh)


Bulmer, J. E.
Howell, David (Guildford)
Prior, Rt Hon James


Burden, F. A.
Howells, Geraint (Cardigan)
Pym, Rt Hon Francis


Carlisle, Mark
Hunt, John
Raison, Timothy


Carr, Rt Hon Robert
Hurd, D.
Rathbone, T.


Chalker. Mrs Lynda
Hutchison, Michael Clark
Rawlinson, Rt Hon Sir Peter


Churchill, W. S.
Irvine, Bryant Godman (Rye)
Rees, Peter (Dover &amp; Deal)


Clark, Alan (Plymouth S)
Irving, Charles (Cheltenham)
Rees-Davies, W. R.


Clark, William (Croydon S)
James, David
Renton, Rt Hn Sir D. (Hunts)


Clarke, Kenneth (Rushcliffe)
Jenkin, Rt Hon Patrick (Redbr)
Renton, Tim (Mid-Sussex)


Clegg, Walter
Jessel, Toby
Ridley, Hon Nicholas


Cockcrott, J. H.
Johnson Smith, G. (E Grinstead)
Ridsdale, Julian


Cope, J. A.
Jones, Arthur (Daventry)
Rifkind, Malcolm


Cordle, John
Jopling, Michael
Rippon, Rt Hon Geoffrey


Cormack, Patrick
Joseph, Rt Hon Sir Keith
Roberts, Michael (Cardiff NW)


Corrie, John
Kaberry, Sir Donald
Roberts, Wyn (Conway)


Costain, A. P.
Kellett-Bowman, Mrs. Elaine
Rodgers, Sir John (Sevenoaks)


Crawford, Douglas
Kershaw, Anthony
Rossi Hugh (Hornsey)


Critchley, Julian
Kimball, Marcus
Rost, Peter (S.E. Derbyshire)


Crouch, David
King, Evelyn (South Dorset)
Royle, Sir Anthony


Crowder, F. P.
King, Tom (Bridgwater)
Sainsbury, Tim


Davies, Rt Hon J. (Knutsford)
Kitson, Sir Timothy
St. John-Stevas, Norman


Dean, Paul (N Somerset)
Knight, Mrs Jill
Shaw, Giles (Pudsey)


Dodsworth, G. H.
Knox, David
Shelton, William (Lambeth, St)


Douglas-Hamilton, Lord James
Lamont, Norman
Shepherd, Colin


Drayson, Burnaby
Lane, David
Shersby, Michael


du Cann, Rt Hon Edward
Langford-Holt, Sir John
Silvester, F.


Durant, Tony
Latham, Michael (Melton)
Sims, Roger


Eden, Rt Hon Sir John
Lawrence, I.
Sinclair, Sir George


Edwards, Nicholas (Pembroke)
Lawson, Nigel
Skeet, T. H. H.


Elliott, Sir William
Le Marchant, Spencer
Smith, Dudley (Warwick)


Emery, Peter
Lester, Jim (Beeston)
Speed, Keith


Ewing, Mrs Winifred (Moray)
Lewis, Kenneth (Rutland)
Spence, John


Eyre, Reginald
Lloyd, Ian (Havant)
Spicer, James (W Dorset)


Fairbairn, Nicholas
Loveridge, John
Spicer, Michael (S Worcester)


Fairgrieve, Russell
Luce, Richard
Stainton Keith


Fell, Anthony
McAdden, Sir Stephen
Stanbrook, Ivor


Finsberg, Geoffrey
MacCormick, Iain
Stanley, John


Fisher, Sir Nigel
McCrindle, Robert
Steel, David (Roxburgh)


Fletcher, Alex (Edinburgh N)
Macfarlane, Neil
Steen, Anthony (Liverpool)


Fletcher-Cooke, Charles
MacGregor, John
Stowart, Donald (Western Isles)


Fookes, Miss Janet
Macmillan, Rt Hn M. (Farnham)
Stewart, Ian (Hitchin)


Fowler, Norman (Sutton C)
McNair-Wilson, M. (Newbury)
Stokes, John


Fox, Marcus
McNair-Wilson, P. (New Forest)
Tapsell, Peter


Fraser, Rt Hon H. (Stafford &amp; St)
Madel, David
Taylor, R. (Croydon N.W.)


Freud, Clement
Marshall, Michael (Arundel)
Taylor, Teddy (Glasgow, C)


Fry, Peter
Marten, Neil
Tebbit, Norman


Galbraith, Hon T. G. D.
Mates, Michael
Temple-Morris, P.


Gardiner, George (Reigate)
Mather, Carol
Thatcher, Rt Hon M.


Gardner, Edward (S Fylde)
Mates, Angus
Thomas, Rt Hon P. (Barnet)


Gilmour, Rt Hon Ian (Chesham)
Mawby, Ray
Thompson, G.


Gilmour, Sir John (East Fife)
Maxwell-Hyslop, Robin
Thorpe, Rt Hon Jeremy (Devon)


Glyn, Dr Alan
Mayhew, Patrick
Townsend, Cyril D.


Godber, Rt Hon J.
Meyer, Sir Anthony
Trotter, Neville


Goodhew, Victor
Miller, Hal (Bromsgrove)
Tugendhat, Christopher


Goodlad, Alastair









van Straubenzee, W. R.
Warren, Kenneth
Winterton, Nicholas


Vaughan, Dr Gerard
Watt, Hamish
Wood, Rt Hon Richard


Viggers, P. J.
Weatherill, Bernard
Young, Sir George (Ealing)


Wainwright, R. (Colne Valley)
Wells, John



Wakeham, John
Welsh, Andrew
TELLERS FOR THE NOES


Walder David (Clitheroe)
Whitelaw, Rt Hon William
Mr. Adam Butler and


Walker Rt Hon P. (Worcester)
Wilson, Gordon (Dundee E)
Mr. John Stradling Thoma


Walters, Dennis

Question accordingly agree to.

16. RELIEF FOR APPRECIATION IN VALUE
OF STOCK (CORPORATION TAX)

Motion made, and Question,
That, in the case of companies carrying on a trade, it is expedient in certain cases to make provision for relief from corporation tax by reference to the valuation of their trading stock at the end of accounting periods ending within or comprising the financial year 1973; and that any Act making provision for such relief may contain provisions incidental or supplementary to the preceding provisions of this Resolution, including provisions with respect to past accounting periods.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

17. SIGNATURE OF CERTAIN REQUISITIONS AND REQUESTS OF THE TREASURY

Motion made, and Question,
That further provision be made as to the signature of requisitions and requests for credits under section 13 or 15 of the Exchequer and Audit Departments Act 1866 or section 1(3) of the National Loans Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

18. APPOINTMENT OF GENERAL COMMISSIONERS IN SCOTLAND AND FORM OF DECLARATION BY CERTAIN OFFICERS

Motion made, and Question,
That it is expedient to amend the Taxes Management Act 1970 with respect to the appointment of General Commissioners for divisions in Scotland and the declaration to be made by General and Special Commissioners and certain other officers.ߞ[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

19. VEHICLES EXCISE DUTY (NORTHERN IRELAND)

6.Motion made, and Question,
That there may be made in the Vehicles (Excise) Act (Northern Ireland) of 1972 (1972 c. 10 of Northern Ireland) amendments (with retrospective effect) corresponding to amend-

ments made for Great Britain by section 50 of the Finance Act 1974 (extension of exemption of disabled persons from vehicles excise duty) and for correcting the short title.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (FUTURE TAXATION)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provisions taking effect in a future year with respect to relief under section 19 or 20 of the Income and Corporation Taxes Act 1970.ߞ[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (LOANS BY PUBLIC WORKS LOAN COMMISSIONERS)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision for enabling the Public Works Loan Commissioners to make further loans in pursuance of section 3 of the National Loans Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

FINANCE [MONEY]

Queen's Recommendation having been signified—

Motion made, and Question,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorize—
(a) any increase in the sums to be issued out of or paid into the National Loans Fund which is attributable to any provision of that Act enabling the Public Works Loan Commissioners to make further loans in pursuance of section 3 of the National Loans Act 1968 up to a limit of £8,000 million; and
(b) any increase attributable to any provision of the said Act of the present Session


in the sums payable out of moneys provided by Parliament under the Consular Relations Act 1968 or the International Organisations Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

Bill ordered to be brought in upon the Resolutions relating to Ways and Means and Finance [Money] and the orders relating to Procedure made this day; to be brought in by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Harold Lever, Mr. Edmund Dell, Mr. Joel Barnett, Mr. Robert Sheldon and Dr. John Gilbert.

FINANCE

Bill to grant certain duties, to alter other duties and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance, presented accordingly by Dr. John Gilbert and read the First time; to be read a Second time tomorrow and to be printed. [Bill 11.]

20. PETROLEUM REVENUE TAX

Motion made, and Question,
That a tax shall be charged in respect of profits from substances won or capable of being won under the authority of licences granted under the Petroleum (Production) Act 1934 (including section 2 of that Act as applied by section 1(3) of the Continental Shelf Act 1964) or the Petroleum (Production) Act (Northern Ireland) 1964, including certain profits accruing before the passing of any Act imposing the tax, and that any such Act may include provisions incidental or supplementary to the preceding provisions of this Resolution.—[Mr. Healey.]

put forthwith pursuant to the Order of the House this day, and agreed to.

21. INCOME TAX AND CORPORATION TAX (AMENDMENTS CONNECTED WITH PETROLEUM AND PETROLEUM COMPANIES)

Motion made, and Question,
That there shall be made in the law relating to income tax and corporation tax amendments connected with petroleum companies or with substances won or capable of being won under the authority of licences granted under the Petroleum (Production) Act 1934 (including section 2 of that Act as applied by section 1(3) of the Continental Shelf Act 1964) or the Petroleum (Production) Act (Northern Ireland) 1964, and that this Resolution shall authorise the imposition of charges to income tax or corporation tax arising out of those amendments, including charges for the year 1974–75 and for past accounting periods.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

Bill ordered to brought in upon the foregoing resolutions; to be brought in by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Eric G. Varley, Mr. Harold Lever, Mr. Edmund Dell, Mr. Joel Barnett, Mr. Robert Sheldon and Dr. John Gilbert.

OIL TAXATION

Bill to impose a new tax in respect of profits from substances won or capable of being won under the authority of licences granted under the Petroleum (Production) Act 1934 or the Petroleum (Production) Act (Northern Ireland) 1964; to make in the law relating to income tax and corporation tax amendments connected with such substances or with petroleum companies; and for connected purposes, presented accordingly by Dr. John Gilbert and read the First time; to be read a Second time tomorrow and to be printed. [Bill 12.]

Orders of the Day — IMPORT DUTIES

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments),
That the Import Duties (Temporary Reductions and Exemptions) (No. 17) Order 1974 (S.I., 1974, No. 1700), a copy of which was laid before this House on 23rd October, be approved.—[Mr. Healey.]

Question agreed to.

Orders of the Day — CUSTOMS AND EXCISE

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments),
That the Customs Duties and Drawbacks (Revenue Duties) (Tunisia) Order 1974 (S.I., 1974, No. 1349), a copy of which was laid before this House on 9th August, 1974, in the last Parliament, be approved.—[Mr. Healey.]

Question agreed to.

Orders of the Day — INCOME TAX

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments),
That an humble Address be presented to Her Majesty, praying that, on ratification by the Swiss Federal Council of the Supplementary Protocol set out in the Schedule to an Order entitled the Double Taxation Relief (Taxes on Income) (Switzerland) Order 1974, a draft of which was laid before this House on 23rd October, an Order may be made in the form of that draft.—[Mr. Healey.]

Question agreed to.

To be presented by Privy Councillors or Members of Her Majesty's Household.

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments),
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Falkland Islands) Order 1974 be made in the form of the draft laid before this House on 23rd October.—[Mr. Healey.]

Question agreed to.

To be presented by Privy Councillors or Members of Her Majesty's Household.

Orders of the Day — ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Johnson.]

HOUSING (MULTI-STOREY DEVELOPMENTS)

10.44 p.m.

Mr. Frank Hatton: I am extremely grateful for the opportunity to call attention this evening to a situation which causes hardship and distress to many of my constituents. I believe that the problem I wish to raise also exists extensively outside my constituency. Indeed, there are other areas of my city which contain housing accommodation which I can only describe as an architectural disaster. The same is true, I believe, of other large urban conurbations.
In spite of what I would call these ugly blots on the landscape I wish to pay tribute to my native city of Manchester, because for 20 years it has been engaged in a mammoth task of removing over 80,000 unfit houses. The re-housing of the occupants and the subsequent redevelopment of the cleared land has been a major priority of the city. I believe that the city holds a place second to none in terms of local authority achievement. Manchester has an outstanding record of slum clearance and housing redevelopment, and I am glad to have the opportunity tonight of paying tribute to it
I want to approach the subject of the problem of families living in multi-storey and "deck access" housing developments in a constructive way, seeking to urge measures which I hope will go some way to mitigate the social and human effects of trying to exist in high-rise and "deck access" flats.
I have within my constituency two areas, in Hulme and Moss Side, where these monstrosities to which I refer have been built. It is not difficult for me to describe the anger, bitterness and frustration of tenants who reside in this type of accommodation. I receive their cries of anguish in my daily postbag and when I meet them in my constituency at the weekend. It is the herding of people together in an inhuman way which causes


so much distress and dissatisfaction. It is this upon which I will enlarge tonight.
Very recently Mr. Richard Seifert, a well-known architect of high-rise flats was quoted as saying, of this type of development that externally most of them were excessively ugly. They consisted of regimented repetitions of machine-made materials and were the rock-bottom of architectural practice. In terms of design they leave a good deal to be desired.
Lift access in many instances is not sufficient and it is difficult to provide a lift service with an acceptable degree of reliability. In most instances, too, arrangements for the disposal of domestic refuse are totally unsatisfactory. In human terms Mr. Seifert believes that:
these kinds of blocks have created a claustrophobic and depressing environment leading to serious crime, loneliness, unhappiness and mental disturbance.
A constituent of mine living in this type of accommodation says:
Morale in these dwellings is so low that distrust and hatred are noticeable. When going round to these dwellings it was noticeable that 50 per cent. of the people spoke through the letterbox before answering. The occupants are keeping themselves to themselves and staying inside the building hoping that a letter may come telling them that there is a house vacant for them. Being alone and withdrawn can have its repercussions. To feel completely alone and isolated leads to mental disintegration just as physical starvation leads to death.
There are other serious factors in this type of development which lead to the unhappiness and misery of which I have spoken. There is a high degree of rodent and insect infestation. I have dealt extensively with many complaints from constituents who have suffered from this inconvenience. I will quote briefly from a letter which the Manchester Director of Environmental Health wrote in June after I had made many complaints about the conditions in which my constituents are living:
One of the main problems in this area is related to the eradication of infestations in multi-storey dwellings which by their mode of construction facilitate the spread of any infestation and make it difficult both to limit the infestation to an individual dwelling and to apply appropriate rodenticides or insecticides in the positions where they will be most effective.
The planning of the development in question was done in close consultation

with the officers of the Regional Office of the Department. The description of the City Architect of Manchester in the brief on the development was that it was subject to detailed development and agreement was recorded on all aspects of the design.
This type of accommodation is totally unsuited to families with young children. It should be redesigned and converted for non-family use. Pensioners, disabled persons, pregnant mothers and young children are trapped in this accommodation. I appeal to the Minister, who I know has a very kind heart and is sympathetic towards these problems, and his Department vigorously to assist the Manchester local authority to make a valiant attempt to rescue the people who are trapped within the accommodation and to redesign and convert it for non-family use.
Displaced families would need to be accommodated in more conventional two-storey housing. Amongst those who are suffering greatly are the elderly who are so lonely and unhappy in this type of accommodation. Special study and research is needed into the social problems produced by development of this type. I ask the Department to use all its resources—it should not be beyond the wit of man—to redesign the accommodation. The development was built within the last five years and bears a 60-year loan debt. We cannot blow it up tomorrow. It must be redesigned and made more suitable for people who have no young children. I urge the Department to use its technical know-how and finance to assist the Manchester local authority to redesign this disastrous development in my constituency and similar developments in other parts of the country.
I want to refer to a suggestion for a more suitable use for this type of accommodation. We have in Manchester one of the largest student populations in the country, and there is a crying need for single bedroom accommodation. Great demands are being made on the purse of my right hon. Friend the Secretary of State for Education and Science, but I urge the two Departments to look at this matter together to see whether some of this accommodation cannot be made available to some of the students within the city when it is relinquished, as


I hope it will be speedily, by those families with young children and by the elderly, both in my constituency and elsewhere.

10.51 p.m.

The Under-Secretary of State for the Environment (Mr. Gerald Kaufman): I congratulate my hon. Friend the Member for Manchester, Moss Side (Mr. Hatton) on raising a subject which is not only a serious housing problem but a serious social problem, and I pay tribute to him for all that he has done since he came to the House to help his constituents involved in this kind of depressing situation.
I join my hon. Friend in paying tribute to the work of the Manchester City Council in dealing with the appalling housing problem with which it has to cope. He is absolutely right when he says that Manchester is pre-eminent, both proportionately and in absolute terms, among all local authorities in the country in its building programme. If other local authorities were building satisfactory homes on the scale that Manchester is building them, the housing problem would be a great deal nearer solution. Therefore, I agree that, in considering these very serious human problems, we should do so within the context of the major and remarkably successful effort that the City of Manchester has made to deal with its general housing problem.
My hon. Friend is also my neighbour as a Manchester Member. Our constituencies abut. We share a common concern in these problems and over the need to alleviate their consequences and to find a solution to them. He is only too accurate when he tells us that many of the families living in the deck-access housing developments are victims of an architectural vogue whose originators meant well but who did not think through the implications of the concept they created.
They wished to combine high density multi-storey dwellings with the advantages of the traditional terraced communities they were replacing, and so they created what were called "streets in the sky". But streets on top of each other are not the same as streets next to each other.
It is true that the new developments have great advantages in many ways

over the terraces they replaced. Tenants who live in houses without baths or indoor sanitation and with no hot water are delighted to move into bright new flats and maisonettes, with indoor plumbing, with baths, and accommodation which has more rooms and far better kitchen facilities and central heating, even though they sometimes grumble at the cost of that central heating. But although we can build a new housing development, we cannot easily recreate the warm community spirit which has vanished with the terraces which have been demolished. There is the noise from neighbours on the deck above and the deck below. The wind-swept balconies along which tenants have to walk are not as cosy as the streets from which they have come. Those welcoming corner shops, with their bright lights on winter evenings, have gone, and sometimes a new development has no new shops for too long a period. Even when they come, there are not enough of them.
The scale of the buildings is often daunting. I have in mind Fort Beswick and Fort Ardwick in my own constituency. The design is frequently all too forbidding. That is why the two estates are called "Forts". "I am on the Fort", constituents tell me. Such developments are often unsightly. The approaches are not attractively landscaped and are often strewn with litter and debris.
Refuse disposal is too often haphazard and infrequent, and this can lead to the proliferation of insects and vermin which are already fostered by design defects. There was a penetrating article recently in The Guardian pointing this out. The caretaker service often is insufficient to meet the needs, where the service exists at all. Too many developments in my own constituency and that of my hon. Friend have no caretaker service. I see my hon. Friend the Member for Manchester, Gorton (Mr. Marks) is here. He has one of the biggest developments of all in his constituency.
My hon. Friend the Member for Moss Side spoke about lifts constantly breaking down due to abuse of them, often by people who do not live in the estates, especially by children from neighbouring schools who play in them. When they work, all to often they are fouled by people from round about and disfigured


by graffiti. These conditions naturally breed vandalism, which in turn reduces still further the morale of the people living there.
When the tenants of these development have lived in cosy old houses, however inadequate they were in terms of physical provision, they are bitterly disappointed by the shortcomings of new property which they have looked forward to occupying. In the case of Fort Ardwick, when it was being completed I was besieged by people wanting to live there, and they were delighted to be allotted flats, houses or maisonettes in the development. Once they found what living there was like, they were very disillusioned when they took into account that very likely they would have to live there for the rest of their lives.
Morale is even lower in the pre-war walk-up flats, some of which have degenerated past rescue.

Mr. Kenneth Marks: indicated assent——

Mr. Kaufman: I see that my hon. Friend the Member for Gorton agrees with me. He works very hard to help his constituents in Brook House.
Both as a constituency Member and as a Minister in my Department, I am deeply aware of the problems to which my hon. Friend the Member for Moss Side has drawn attention within the context of his general tribute to the housing policies of Manchester Corporation. Like him, I am deeply concerned about these problems.
The despair of some tenants can be summed up in a remark made to me by a lady who lives on Coverdale Crescent, more commonly known as "Fort Ardwick", which is now perhaps the best known deck access development in Britain. A few weeks ago, on one of my visits to see the estate, I had a long discussion with a number of the residents. One of them said to me, "If Labour wins the election, it ought to do two things: abolish the House of Lords, and demolish Fort Ardwick." I should not for a moment dispute the logic behind both the lady's objectives, but I have to point out that developments costing hundreds of thousands of pounds, or even millions of pounds, cannot be demolished

as soon as they are built, despite their depressing appearance and sometimes dreadful shortcomings.
We have to try to improve the quality of life in these buildings, and that is the aim of my hon. Friend in raising this subject tonight. It is also the aim of the City of Manchester, and I think my hon. Friend will agree that the efforts that have been made so far in Hulme by the city show what can be done if a determined effort is made to try to deal with these problems. When I was in my hon. Friend's constituency during the election I was able to compare the situation at Hulme now with what it was at the time of an earlier by-election, and I found that there had been a most heartening transformation.
My hon. Friend asked that the Department should carry out some research on the problems that he has mentioned. I am glad to tell him that in the Department we are busily engaged on a number of important studies which, when they are completed, could help us to give advice to local authorities which could ease the position.
We are engaged on a study of difficult-to-let accommodation. All hon. Members present tonight know that this difficult-to-let accommodation exists in many parts of the country. My hon. Friend the Member for Leeds, West (Mr. Dean), who has a distinguished history in Manchester, knows that even in Leeds there is that kind of problem.
We are engaged on this study of difficult-to-let accommodation—property which is so unpopular that even those in great housing need refuse to accept tenancies there. We are trying to track down the reasons for this unpopularity, in the hope that local authorities will be in a position to rehabilitate their reputation. This project is expected to take about a year, and I am following its progress closely.
We are also carrying out research, in collaboration with the Home Office, on vandalism, and we are looking at a number of housing schemes in two London boroughs—at their design, their social composition and other factors.
We are surveying the problems of children living off the ground, and here again we hope to be able to produce useful guidance. We have embarked, in


addition, upon a particularly important research project, an in-depth investigation of multi-storey housing estates with some deck access blocks. The project that we have undertaken is in London, but its lessons will be available for other parts of the country.

Mr. Joseph Dean: Does my hon. Friend agree that these deck access flats which maintain or recreate some of the problems which they were supposed to get rid of were not the project of Ministers at the time but were the product of those who wished to accelerate the building figures and therefore indulged in this kind of expensive gimmickry?
In every major city people have moved away from this type of development because they have seen the disastrous results that flow from it. As has been said by my hon. Friend the Member for Manchester, Moss Side (Mr. Hatton), the average English family wants a traditional two-storey home and is not satisfied with anything else, and never will be.
We should be very careful when some-body is trailing his coat and throwing his hat in the ring. It would be disastrous if we were to embark upon another kind of gimmickry in the form of industrialised temporary accommodation.

Mr. Kaufman: The problem with developments such as this in Hulme, Moss Side. Ardwick, Beswick and other parts of the country is that they are architects' fantasies in which families have to live. There was a period during which the Department of the Environment, or the Ministry of Housing and Local Government, tried to persuade local authorities that high rise developments were the best solution to their problems, but it was the local authorities which commissioned them, which had them de-signed and which built them, and they must, therefore, take full responsibility for them. For better or worse, it was Manchester City Council which, with great pride, undertook the Hulme development, and the fact that it has failed is not the responsibility of anyone else.
As I said, we are studying the need for and the provision of community services and facilities and the scope for improving tenant-council relations in this kind of development. My hon. Friend has called attention to the Government's

responsibility. We are conscious of our need to advise and assist where possible. In this connection, I would particularly draw attention to the allowances reckonable for subsidy which are available from the Department towards the cost of providing, on new housing schemes, outdoor spaces suitable for unsupervised play. Not enough local authorities are making use of this aid and I would certainly like to see our recommended standards of play provision as the minimum provision on all new housing schemes. But this applies to existing housing schemes as well as to those to which my hon. Friend has drawn attention, because existing schemes with a lack of adequate play provision can also benefit from Government aid.
The cost of providing or improving play spaces on existing estates is reckonable for subsidy. On a large estate the subsidy could run to many thousands of pounds. But while we make the subsidy available, we cannot compel local authorities to take it up, and in the end the very real problems to which my hon. Friend drew attention have to be solved by the local authorities which build these developments and are responsible for their management.
Even within the present stringent financial situation, management can be more efficient and run more economically. It is for the local authorities to ensure that refuse is regularly collected and that the estates are kept tidy, to ensure that the lifts and the lighting are properly maintained and that repairs are promptly carried out rather than complaints ignored. Too often, they neglect some or all of these duties. Too often they do not respond with sufficient awareness or alertness to justified complaints.
It is for the corporations to maintain the morale and standards of their estates. Nothing demoralises tenants more than a belief that their estate or block of flats is being used as a dumping ground for problem families. This practice is fair neither to the tenants nor to the problem families and it can lead to hopeless deterioration of the estates.
Above all, the best way to rescue and regenerate these housing developments is to involve the tenants far more in their management. Too often tenants and council have no relationship apart from rent payment and collection. I would


like to see tenants involved in the management of their estates—in deciding priorities for expenditure on repairs and amenities. If they were told what budget was available, they would be more aware of the stringencies affecting local authorities, but at least they would decide what came first on their estates—a playground, a wash house or a community centre. Moreover, if the tenants were genuinely involved in running the estates, they would ensure that neighbours who left too much litter about or abused the lift or in any other way caused the environment to deteriorate would be made

aware of the need to improve standards in the interests of everybody.
The problems of these estates are immensely serious. Upon their solution rests the future of our inner cities—whether they are to survive and flourish or to degenerate as we have seen across the Atlantic. In raising this subject, my hon. Friend has done a service not only to his constituents but to hundreds of thousands of people throughout the country.

Question put and agreed to.

Adjourned accordingly at fourteen minutes past Eleven o'clock.